Asian Property Review examines whether going hi-tech for property auctions is advantageous and discovers there are more pros than cons in doing so.
Text by Mira Soyza
“Going once, going twice, sold to the highest bidder!”
The topic of auction is a territory many still find quite baffling. Since each country has its own sets of rules in regards to property auction—in some countries, each state forms its own legislation—the auction scene can be a little tricky to the average Joe.
Buying at an auction is often perceived as the most common way of acquiring an asset at below market value. However, over the years, the business of property auction has become a playground for syndicates—these cartels manipulate the prices by paying off genuine bidders, extorting compensation out of an interested bidder, harassing bidders to withdraw from an auction and many more unethical practices. Even more shocking, ofttimes, lawyers, auctioneers, bank staff as well as court staff work hand-in-glove with these syndicates to manipulate the auction process.
In a bid to crackdown on these syndicates and ensure a fair and transparent auction process, Malaysia decided to leverage technology to the full – by conducting online all public auctions held at the High Court. From July onwards (barring any unforeseen glitches), anyone can log in, register and bid online. This, according to the authorities, is partly to stop the unsavoury activities of the syndicates as well as move towards a paperless system (wherever possible).
Few countries have adopted e-auctions and those which have, have not implemented it fully, says Alan Poon, Principal Strategist of Superior Wealth Mastery. Poon asserts that despite the advancement of technology, the fact remains that conventional live auctions and live biddings are “still very much favoured and practised effectively.” Poon is known to have made a pile from buying auction properties and occasionally shares tips on how to successfully bid for the right properties.[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”1,2,3,4,5″ ihc_mb_template=”1″ ]
Some countries such as the US, the UK, Australia and even India have for the longest time partially moved real estate bidding to the virtual world. “E-bidding has been practised in India for about a decade,” says Mudassir Zaidi, National Director of Residential, Knight Frank (India) Pvt. Ltd. “Typically, land deals are done through e-bidding. This isn’t the case with under-construction properties, however, which are still sold the traditional way directly by developers.”
NOT FOR EVERYONE
Since the concept of e-auction is relatively new in this part of the world, many are still sceptical of the complications that might arise from e-bidding. Interestingly, the developed Asian countries such as Singapore and Hong Kong have not made the virtual shift yet. Sharon Lee, Director and Head of Auction, Knight Frank Singapore suggests that since auctions are typically held in a central location, a small and highly accessible country like Singapore, does not require bidders to travel far to attend an auction: “It is convenient to attend an auction here since you don’t have to travel for hours from city to city—this may be one of the reasons (why e-auctions are not favoured there).”
Similarly, in Hong Kong, web-based property services only provide mainly purchase and sale information. According to Thomas Lam, Senior Director, Head of Valuation & Consultancy, Knight Frank Hong Kong, e-bidding as a mode of sale is not common there as physical inspections and the necessary paperwork are required during the acquisition process. “E-bidding provides buyers with convenience in certain countries. Compared with traditional auctions, online bidding should have no major differences in terms of transparency or fairness, subject to each country’s respective laws.”
We analysed several aspects of e-bidding to determine whether the new system deserves a thumbs-up or a thumbs-down.
1 Speed of transaction
Moving fully online means the process will no longer require copious amount of paperwork that slows down the speed of transaction. In Malaysia, the current method only allows two sessions of auction to be conducted at the High Court. “If ever we see a full implementation of e-bidding happening for titled properties, we could be seeing multiple slot sessions happening or even simultaneously instead of waiting for the court room to be cleared manually,” says Poon.
This means that e-auction provides a faster transaction speed than the traditional auction. “Templates or documents used in the e-bidding platform should enable faster processing than the current backlog of work required for the auctioneer office pre and post auction.”
2 Transcends physical barrier
Traditional auction requires a venue and the presence of bidders, which could be challenging to those who are physically challenged to take part. With e-auction, bidders, regardless of their disability, can now easily bid in the comfort of their home or office with just a few clicks on the keyboard.
3 Requires computer savviness
While the majority of us can operate a computer in our sleep, there are a number of people especially the seasoned players in the auction industry who are less IT-savvy. Therefore, a complete transition to online bidding may to a certain extent discriminate against this group of bidders and cause them to lose out on the opportunity to grab a good deal.
4 Connectivity Issue
Although the world is getting rapidly connected via the Internet, it is not surprising that economically diverse Asia holds both the title for the country with the fastest Internet connection speed (South Korea) as well as the country with the slowest connection speed (India) in the world.
“Since e-bidding will be relying entirely on the Internet, connectivity and reliability become a main concern,” says Lim Boon Ping, Vice President of Malaysian Institute of Estate Agents. “What if the bidders wanted to bid higher but at that crucial moment, he lost his connection or his connection becomes unstable? Slow connection will only make it ineffective, and many unknown problems may surface.”
5 Identity Verification
According to the State Bank of India (SBI), in order to participate in an e-auction, bidders are required to have a valid digital certificate with an e-auction login ID and password. This certification is equivalent to the physical driver’s license, passport or membership card and is needed for the purpose of verification of the bidder’s identity, to access information or services on the Internet or to sign certain documents digitally. Transactions that are signed using a Digital Signature certificate automatically becomes legally binding.
6 Anonymity and privacy
According to Mudassir Zaidi, since anonymity and privacy are the main focus of the security protocols of e-Auctions, participants will only be able to see the competitive bids placed by other bidders and not the identity of the bidders. This protects bidders from being the target of cartels.
All sensitive documents in the e-tendering site are encrypted and stored in the server using the Public Key Infrastructure (PKI) technology. Both the Technical and Financial Documents are encrypted and stored to ensure the security of your information. Even the system administrator cannot view the bid documents before bid opening. Only an authorized bid opener can decrypt the documents and convert them into readable format. In layman’s terms, your personal information is guarded and kept secure.
8 Reaches a wider audience
Since physical presence is not required, bidders are no longer limited by their geographical location which means a bidder can easily bid for a property from anywhere in the world. Lim suggests that foreign bidders should always refer to the Proclamation of Sales (POS) of the hosting country before making a bid. It will be written clearly whether or not foreigners are allowed to bid for that particular property. In cases where foreigners are allowed to bid, it is still subject to the prevailing regulations on foreign property ownership in that country.
“With e-bidding, the price discovery is very transparent and happens in real time,” says Mudassir. “Compare it to a closed bid where you don’t know the highest bid right up till the end and even then you don’t know (till bids are opened) if people will increase their bids; e-bidding is undoubtedly more transparent.”
UNDER THE HAMMER TIPS
Much like a traditional auction, it is important to ensure that the necessary inspections have been done on the property before placing a bid.
Having a digital certificate is compulsory for some e-auction websites to help with the verification of your identity.
Make sure you know the country’s policy on foreign property investment. Certain countries like Hong Kong has no restrictions in place for foreign buyers participating in property auctions, while some have pretty strict rules.
Do some research on the real market value of the property you are bidding for— do your homework and talk to your local real estate agents.
Do not get too emotional during the bidding process; bid for the amount you are comfortable with and know your limit.
Make sure that your internet connection is stable and your computer is performing optimally. Any issues with lags or freezing screen should be addressed before attempting to bid.
Perform your bid through a secure network such as the ones at home or work. Avoid bidding through unsecure public networks such as cyber cafes or free restaurant Wi-Fi connections.[/ihc-hide-content]