How to Build Online Real Estate Auctions
eCommerce Nov 11, 2020
Main / Blog / How to Build Online Real Estate Auctions
Previously, real estate auctions attracted mainly investors in search of the most profitable deals. Now they are becoming popular among ordinary people who are looking for middle ground between price and quality. Live auctions are rapidly moving to the internet.
How Do Online Real Estate Auctions Work?
The target audience of online auctions is people who want to buy or sell real estate as quickly and profitable as possible. Most often, sellers are the property owners, agents, or asset managers, and any interested person can become a buyer.
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Auctions vary in functionality: for instance, some of them allow free registration, and others are open exclusively to holders of the appropriate licenses. An important advantage of auctions is that they usually have exclusive offers available nowhere else, which obviously attracts buyers. Online real estate auctions get their profit by taking а percentage fee from the price of successful deals.
There are several types of properties that can be put up for sale on a real estate sale online auction:
Short-sale properties. The deal is initiated by a homeowner who is no more able to fulfill their mortgage obligations. To pay off the debt, they sell the real estate at a price much lower than the average market value (since the matter of time is quite pressing).
Foreclosed properties. The deal is forced by a lender. Failure by a borrower to fulfill their mortgage obligations leads to transfer of real estate to the ownership of the lender (a foreclosure), so that they can initiate its sale to fully cover the loan.
Bank-owned properties (also called REO – real estate owned). It happens that the sale of a foreclosure fails. As a result, the bank becomes the owner of this property. Such deals can only be found on banks’ websites and online auctions. They especially often attract real estate investors, since the price of a house is usually significantly reduced.
Retail properties. The initiators of such deals are owners of shopping malls, stores, and other businesses who are looking for investors. In addition, these offerings benefit newcomers to real estate investments by allowing them to expand their portfolios.
Flipped properties. This category includes, for example, houses owned by entrepreneurs who have invested money in the improvement of the property and its preparation for the sale. Buyers of such real estate are usually people who have no previous experience in buying a home.
How to Create Websites for Online Realty Auctions?
The functions of real estate auction sites must be thought out from the perspectives of both a seller and a buyer, and possible disputable situations should be taken into account. We have summarized the minimum requirements and compiled a list of features that must be implemented:
First things first, users of your future auction solution should be able to create personal accounts to set off their individual auctioning experience. A regular account registration form should require one to fill out a name and/or site login, email address, personal info, residential address, zip code, phone number, as well as social media links. All this should be customizable at any moment.
Getting a user’s email a top priority and a necessary first step, which allows verifying a person’s account and notifying them further on about all major updates and events (e.g., placing a winning bid).
Realty investors and agents registering on your website should also specify their corporate position, company name, and real estate license
Then, there is payment info (credit or debit card information) necessary to specify to make financial transactions for auction participation. This data will be processed by a payment gateway you should integrate with the website to enable transactions in the first place.
Owners or their legal representatives should be able to put up their property for auction. You can make it free or follow the example of RealtyBid and ask for a commission per position (the previously mentioned website’s fee is $150).
Sellers also need to be able to describe the characteristics of their lots (a 3D visit feature would be an excellent addition), edit offers, set the duration of bids (a period, during which a property is getting bids in the auction listing). It is a strict obligation for sellers not only to post a real description, but also to add recent images and videos.
The property-related disclaimers and notes section would be a handy area to outline legal terms, rights, conditions, and obligations (e.g., what format of payments you require and specific property details).
From our experience in the development of real estate auction websites using Magento, we highly recommend adding such functions as the starting bid (the lowest bid one accepts for your auction lot) assigned by the seller and a timer that lets buyers see the amount of time left before the start of the auction.
Not least important property addition points may also include a bidding history for individual users, customer support contacts, specification of the related fees, etc.
Fast and advanced searches should be available. By using the quick search, the buyer will be able to specify several basic characteristics of the property that might interest him/her. Filters are everything - advanced search should include the ability to specify details such as location, date of auction, lot price. Also, do not ignore the map access function – it is important for buyers to clearly assess the location of the property or to filter offers based on which area is preferable for them.
In addition to filtering, you should provide handy property sorting as well - let users sort auction lots top-to-bottom and bottom-up, for instance, by remaining auction time (so that people could see how much time they have left to place a bid), current bid (the last set price on the auction lot), date of property addition, auction beginning and end dates, popularity and size of properties.
The website should collect and analyze the history of requests of each specific user in order to generate individually targeted advertising (showing lots with characteristics that match the top search results).
Real Estate Auction Online Bidding Process
There is no binding to a specific location in this kind of auction – everything is done online. The event duration is limited by the seller. The process itself lasts until the allotted time expires or until only one bidder remains.
Optionally, you can require buyers to place a bank-held 5-10% deposit to be able to start bidding, which is both a means to allow determined bidders to the event and to limit a maximum bidding price.
Detailed statistics should be provided on the web page of each auction object so that both sellers and buyers have access to constantly updating answers to questions such as how many visitors viewed this page, how much the average bid and how much the biggest bid is.
To make the process all the more convenient and friendly for auction participants, you can also implement:
- A bidding countdown clock - a timer set for 2-3 minutes, within which a bid must be raised. Unless it is raised in time, the last highest bidder wins the auction.
- Automatic bidding - you can enable users to bid automatically via special proxy software. This way, an eager user can choose to remain the highest bidder of the auction without actively participating in the event.
- Buy It Now option - you may also allow users that know exactly for how much they expect to sell their property to set a price for buyers to get the property deal immediately.
Closing the Bid
After going through the tedious process of participating in the auction, a seller and a buyer finally find each other and proceed to signing a contract. It spells out the conditions for the successful closing of the deal and the time frame for the financial or any other obligations of the participants, after which the deal becomes closed. The online auction platform transfers the process of implementing the legal aspect of the deal under the jurisdiction of an authorized office.
Bid closing may take from several weeks to 60 days and the contract should specify the concrete date. At the end of it all, the authorized office makes the necessary arrangements to officially transfer the property ownership to the auction winner.
A separate tab should contain a calendar that automatically saves information about the trading dates for the user’s favorite lots. Also, a service for notifying website users about the approaching or starting of bids should be configured there.
The platform should, at some frequency, send participants brief summaries about the most important upcoming events, trends in user behavior noticeable from the statistics, and financial turnover during specific periods of time.
Give users a convenient space to manage and monitor all their activities. This will be a go-to start off section for users willing to both place lots and participate in auction events. Such a dashboard may include the following sections and functions:
- Favorites - a separate individual list where users may save properties they put their eyes on to monitor the auction progress to bid on later;
- Notifications - in addition to standard email notifications that some users may miss out on, you can also provide updates right on the website to help user keep in check as to all their website activity;
- Bids management - to ultimately speed things up for users, you can let them place bids on relevant properties right from their account dashboard, without even the need to search for lots manually.
- History and statistics - visual charts on user activity history and statistics will keep users up-to-date upon every other account log in.
- Reports - based on the gathered statistics and history, reports can be generated automatically to let bidders analyze their activity even more in-depth.
How to Make Your Estate Auction Website Secure?
Such a website involves ensuring the successful completion of deals with financial obligations that are far from small, so the maximum security should be ensured at all levels of use. The purpose of all real estate online auction websites is to establish themselves for a long time as reliable auctions with real offers, protected from any fakes and fraudsters. Dinarys experts highlight the following features:
- Mandatory proof of identity for bidding. Users must be asked for a credit card number and ID data to confirm the real existence of a person who is trying to bid. Passport or bank data must be checked by real people from the platform's moderation team.
- Tracking finance. The seller must have access to detailed data on placed bids and up-to-date financial information.
- Ratings. Each bidder must have a rating indicator visible to everyone, which is calculated based on ratings left by those who interacted with them before.
- Detailed characteristics. Each lot must be described in as much detail as possible; photos and videos (from various angles, with normal lighting, good quality, no processing), and the necessary documents must be attached to it.
If a vulnerability had been missed on the platform and a fraudulent scheme was implemented through it, its team should be ready to fully compensate the victims.
Monetizing Online Estate Auctions
The profitability of auctions is ensured by various fees. Different companies have a different approach to monetizing services, but the most common methods are:
Fee for placing an offer. The average cost of publishing one lot is $150-200. However, reputable reliable companies calculate the fee as a percentage of the value of the property. This fee is not refundable in any case, regardless of the bidding progress and the success of the deal.
Buyer's fee. The final commission for supporting the deal (providing the platform with the necessary functionality, moderating the auction, assistance in drawing up and legalizing the contract) is paid by the buyer. Typically, it is 5-10 percent of the deal price, but no less than $1,000. After paying it, the buyer is given 30-40 days to fully pay the price specified in the final contract. If they fail to do this on time, the property will be re-put up for estate sale online auction, and the auction website will not be obliged to compensate them fully or partially for paying the fee.
Transfer fee. The tax for the transfer of ownership of real estate from the seller to the buyer is prescribed in the contract. The payment depends on local legislation: for example, when such a deal is carried out in California, $1.10 will be charged for every $1000 of the final price.
Technological contribution. The platform provides all the necessary functions, ensures data security and moderates everything that happens on the website – this is what all users of an online auction pay for. The amount of the contribution varies between $200-500, and it is included in the final price of all properties sold.
Also read: How to Build an Auction Website like EBAY
Best Real Estate Auction Sites
Let’s look at some examples of successful real estate auctions websites.
This platform was launched in 2007. Its intuitive interface has played a role in its popularity. Its distinctive feature is an increased number of offers due to real estate offered by third parties. The closing of a transaction takes place within 30-45 days. The disadvantages of this platform are that the purchaser needs to independently study the system of contributions in advance. Also, information about third parties participating in the auction is not always complete and reliable.
2. Hudson and Marshall
This company has been holding its position in the market for about 50 years. It is known for using real estate agents. The closing of a deal takes 30-45 days as well.
The functionality of the website is very extensive: on some lots you can make an instant bet, real estate can be classified under the "reserve" section (the reserve value set by the seller, which must be outbid) or the "absolute" section (the lot will be taken by the one who offers the largest amount of money, and the price of the property on the day of the auction does not matter). If you have any questions, you can go to the necessary tab with easy navigation.
The disadvantages of this auction site include being limited to only offers by Hudson and Marshall.
3. Williams & Williams
This company offers both traditional and online auctions. The website works with different types of real estate – you can find luxury villas, ranches, and commercial constructions here. It takes 30 days to close a deal. If necessary, customers can use the help center. The section on the basics of financing, open to all those who are interested in the topic and would like to learn more about real estate investments, is a nice gesture.
Their experience in holding luxury estates home auction online has firmly cemented the platform's place in the list of market leaders.
The niche of online real estate auctions is very profitable and attractive, but it requires a full understanding and the right approach to business. If you want to keep your investments safe and quickly reach the desired level of payback, contact our experts. We have brilliant portfolios that prove our skills in creating websites with any tools – from Magento and Shopware to customizing absolutely unique projects. We will help you create a functional website with the perfect interface that would provide revenue streams from the very beginning.
Contact us to get your free consultation.
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