The word auction evokes images of hyper-expensive fine art being sold for staggering sums to the highest bidders, with the media in frenzied attendance to chronicle the process every step of the way. Real estate auctions, on the other hand, have in the past been associated with distressed properties being put on the block sales by banks and other financial institutions to recover their dues from defaulting borrowers. As such, real estate auctions have been viewed in a rather negative light – though they can and often do involve enormous sums of money.
Make Way For Auctions
Auctions, on the other hand, are auctions conducted online so as to enable quicker and more profitable property sales with much less fanfare, efforts and costs involved. Until recent times, banks conducted physical auctions of distressed properties by posting newspaper advertisements and making arrangements for serious potential buyers to assemble at a given venue. However, limited awareness and the massive efforts involved in conducting such mainstream auctions often failed to result in the expected sales – or, for that matter, unmasking the appropriate value of the properties in question.
Even though such properties attracted discounts of up to 10-15% as banks merely wanted to recover their costs and not necessarily earn profits, the stigma associated with distressed property auctions and the secrecy surrounding them caused most buyers to steer clear of them. Auctions are set to change this mind-set – they take place in the virtual world, and anyone make their bid on residential properties with a real hope of acquiring them at very favourable prices.
How Auctions Work
Basically, developers tie up with leading real estate portals to announce the auction dates and timing. Alongside, the developers and concerned portals must provide detailed information and documentation about the properties on auction in the proposal documents, including the title deeds, images and videos of the properties, minimum prices and other legal aspects as per the rules and regulations. For buyers, it is important to study the bid document carefully, conduct a due diligence to understand all details, and explore the option of physically inspecting the property once before making a final decision. Since there is an entry fee involved, only genuine and serious players participate in Auctions, which saves everyone’s time and efforts.
Who Benefits In Auctions – Buyers or Developers?
It is actually a win-win situation for both parties. To list out the benefits in an Auction:
- Since the auction is conducted online, buyers can participate from anywhere in the country to purchase properties that strike them as sound investments among the various listed options
- For the sake of transparency (since trust is a major factor in the success of eAuctions) developers, government institutions and banks provide detailed information without withholding any details, which means one can buy undisputed properties without hassles or misgivings
- Auctions are a new way of selling real estate, so one can expect to purchase into brand-new constructions instead of old properties (which may be disputed or have other hidden legal catches)
- Prices are invariably very attractive, as the operational costs of selling a property physically are reduced manifold while selling them online and developers can offer discounts
- Participating developers can expand their reach without investing in physical infrastructure, manpower or other additional costs of selling their projects
- A spirited bidding process can earn them handsome returns, as there is no upper limit fixed to the final price of the property
- As long as the basics of the process are adhered to and all rules and regulations are followed diligently, Auctions are the easiest and quickest way to conduct business without affecting the routine operations of the builder.
How Effective Are eAuctions As Real Estate Selling Platforms?
So far, nothing could replace physical inspection of a property – not least of all because there are sizeable sums of money involved. However, things are changing rapidly. Going forward, technological advancements will ensure that Auctions deliver enormous benefits to both buyers and developers. Buyers have access to the best properties on their cell phones and can make their decision without stepping out of their home. Simultaneously, developers have access to buyers from across the country at a fraction of a cost that they usually incur for marketing their projects.
eAuctions certainly faced initial teething problems, but technology has ironed out most wrinkles in the process. A number of developers have already realised the potential of taking the Auction route to sell their properties and are investing enthusiastically in the process by meeting buyers’ requirements of paperwork, ease, transparency to earn credibility in this cutting-edge property marketing domain.
The Future Of Auctions
With growth and advancement in technology, the Internet is the future of business – and the real estate industry is falling in line to reap its multiple benefits. With 402 million active Internet users in India by end 2015, the phenomenal growth of ecommerce and adequate infrastructure and system controls now available, the real estate industry has become a veritable goldmine once again.
Auctions have a tremendous future considering the massive benefits, ease, transparency and efficiency they bring to the entire process of buying and selling properties. It’s early days yet, and early adopters of the exciting and immensely lucrative Auction platform will be the ones to benefit the most. In fact, Auctions are all set to become the new standard in real estate marketing, and will totally revolutionize the sector in the years to come.
By Ashwinder Raj Singh, CEO – Residential Services, JLL India