The Process of Traditional Sales
Traditional sales of real estate, and other high-value assets, also called Offer and Acceptance formula, have necessarily involved complicated sales pipeline and transaction workflows. Currently, many types of real estate assets for example might receive in a traditional context multiple competing offers from various interested buyers. Each offer might have different pricing and conditions associated with it. Sellers need to go through a formal process to respond or counteroffer to offers provided by potential purchasers or buyers. Other buyers might be willing to increase the offer they have made for the purchase of the real estate property but have no opportunity to do so without a counter offer in a traditional context. In addition, in a traditional non-auction context, buyers would normally not be aware of the price that is being offered by other buyers and might be reluctant to initiate an offer for too high a price for the real estate. If purchasers were able to know the current offer price, it might benefit vendors as purchasers might be enticed to make reasonable offers over the current price and maximize profits to the vendor.
Even in a traditional context, taking an auction approach removes some of the uncertainties and complications from the real estate sales process. Multiple bidders are able to bid on the purchase of a property with the highest bid price being the winner.
In a seller's market, traditional sale process often creates Bidding War.. Traditional sale process is also called blind offer system. Because nobody has any idea what the ballpark of other offers could be, they may offer thousands, and even in some cases ten of thousands over the next high offer to win the bidding war. For example, a house is listed for $365,000. Buyer A offers $360000, Buyer B offers $367000. Because buyer C does not want a risk of losing, he offers $390,000. If this house is for sale by a transparent bidding process like live auction or online auction, the Buyer C just offers $368000, and win this property. In the blind offer system, he ends up overpaying $22000.
Buyers are often so desperate to purchase a property that they will aim for a much higher figure to try to be certain of winning. This means that buyers are artificially inflating the price of a property well beyond what is reasonable. With a more transparent system, this would not happen. Should the blind offer system continue, eventually the housing market will become unsustainable with these artificially high values on real estate, and then it will inevitably enter a period of decline.
The Process of Auction Sales
Traditionally the auction takes place at a physical location within a fixed time window, with the last bidder standing, so to speak, ending up being the ultimate purchaser of the property.
While the auctioning of real estate and other high-value assets such as this does have some benefits which make it attractive, including the fact that all of the bidders on the property can know what the going price is and make their bidding decisions appropriately, the auction process carries its own set of limitations. In a traditional auction for example the bidders all need to aggregate in one
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location at a fixed time within which to bid on the property. This has limitations then in terms of the physical location of the bidders, and even if a telephone call or the like was used to offer remote access to an auction session to bidders, there are time zone limitations which limit the ability of bidders in alternate time zones to easily attend the auction. An auction method which remove these geographic and time based limitations would, it is believed, be well received.
The Enhanced Online Real Estate Auction Sales Method
Online sales and auctions methods have proliferated for the sales of many types of assets over the last number of years. Varying approaches and systems have been conceived for use in the sale of many different kinds of assets including those that would involve reasonably complicated sales processes including real estate. Real estate sales however offer or provide a unique set of complications that could, if addressed appropriately in an online sales method, allow for additional flexibility and it is believed would be reasonably widely accepted in the marketplace. For example, some previous methods do not require any prior identification or verification of userswho could place bids – bidders might be allowed to participate in the process who have not been either tested for compliance with legal requirements or who otherwise may not have been verified from the perspective of their bona fides or ability to pay etc. Other methods, attempting to deal with this lack of verification or identification, require that the vendor personally authorize or approve the participation in particular bidders in the process which might unduly limit the number of bidders who were able to participate. Finding a way to address the need for previous qualification or identification of bidders in an online auction method, while minimizing the need for manual intervention either by the vendor or a system operator, would enhance the commercial applicability and palatability of online real estate auctions.
An online auction system which did not require real-time participation by bidders, which provided security for vendors by way of verification or other indication of the bona fides of bidders participating in the auction would be an enhancement over the current state of the art in this area.
An example of enhanced Online Real Estate Auction Platform can be found on the website of Bidwin.org
Robin Liu is the CEO & Founder of Bidwin.org, an Innovative Online Real Estate Auction Platform in Canada
Email Robin Liu.