Online vs. Traditional Auctions: How do they work differently?

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Auctions have become one of the most popular ways to buy property quickly, thanks to the speed at which auction purchases can be completed and the opportunity to grab a property at a bargain price. Whether online or otherwise, property auctions can be useful for seller, buyers and estate agents alike. But how do online and traditional auctions differ?

How do traditional and online auctions work?

Properties for a traditional auction are typically advertised in newspapers, via estate agents and auctioneers, and online. They can range from standard residential homes to properties that have been repossessed or that are un-mortgageable. Auctions have become a popular way for investors to buy a property at a lower price, particularly with house prices soaring. The benefit of a traditional auction is that it’s a social event where buyers and sellers can communicate directly. 

The completion process is quick and easy, and buyers can enjoy the satisfaction of exchanging much faster – often on the day of the auction. UK finance brokers Finbri explain that “Bridging loans are used by those in the property development business who need to make large secured payments at short notice such as auction purchases.” For buyers who need a quick transaction, a traditional auction is very appealing. Bridging finance is often used to speed up the process, instantly taking a property purchase from months to days.

Online auctions follow similar principles to traditional auctions, but there’s far more flexibility involved. There’s no physical location to the auction taking place, so buyers can purchase a property from anywhere. The timeframe for an auction is also more flexible, with auctions taking place over days, weeks or months, giving buyers the chance to place their bids. Once a bid is accepted, sales are completed within 28 days, although it can take longer if it’s a conditional auction. However, there are no costs associated with a traditional auction, so it’s a less expensive option for sellers and just as convenient. 

What are the key differences?

One of the primary differences between online and traditional auctions is speed – once the gavel falls at a traditional auction, contracts are exchanged immediately and completion takes place 28 days later. Online auctions are closer in style to an eBay auction, where bidders bid online only, and the accepted buyer has 28 days to exchange and a further 28 days to complete. 

But security also plays a factor – many buyers choose auction properties because they’ve experienced a property purchase fall through or because time is of the essence. Property buying is a stressful process for anyone, and having a smoother, quicker and more secure process is beneficial for all parties. 

Once the bid has been accepted at a traditional auction, neither buyer nor seller can pull out, meaning the risk of the purchase falling through is removed entirely. However, with an online auction, there are still 28 days to exchange and so the buyer can still pull out since there’s no legal obligation to complete. 

When it comes to the price, sellers are naturally going to seek out the best possible price, while buyers are looking for a bargain. Both traditional and online auctions aim to satisfy the needs of the client, though since a traditional auction doesn’t require a fee from the buyer until the exchange has taken place whereas online auctions require a reservation fee since the exchange and completion process takes longer which is usually up to 4% of the purchase price and included in the stamp duty. 

Naturally, given the process of bidding, online auctions offer the possibility of buying a property from any location. But for some, that can be a downside – some people enjoy the atmosphere of the bidding room and the face-to-face contact that it offers. The choice between traditional and online auctions tends to fall to speed and convenience, but as we can see there are various factors that differentiate the two. 

Final thoughts

There are pros and cons to each option when it comes to buying a property at auction. While a traditional auction offers more security since the exchange takes place almost immediately, making it legally binding on the day, an online auction offers more flexibility and is a more convenient solution for individuals who are buying or selling property in a different location to where they live. However, both methods enable the seller to secure the best price for their property. 

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