What We Learned About Auction in 2023
How it Will Prepare You for 2024
By Amy Daniel
Auction, once a market dominated by investors, is becoming more mainstream. People who previously were frightened by the process are no longer afraid to go down the auction path. In the last year, there was a shift to where everyday homebuyers became more comfortable with the auction process.
Based on ServiceLink’s 2023 State of Homebuying Report (SOHBR), which surveyed 1,000 individuals who either purchased or tried to purchase a home in the last three years, 40% of respondents would consider buying at auction, up from 33% in 2022. Of that, Gen X was most likely to consider buying at auction at 46%, followed by Gen Z and millennials at 39% and baby boomers at 30%.
So, why the shift? And what does this mean for investors who were in the game first? Here are some of the trends we saw in 2023 that will prepare you for a better 2024.
Auction is An Added Channel
At a time when the market is down, inventory is low, interest rates are high and prices have held relatively steady, auction has provided buyers with another avenue to find the right fit no matter what they are seeking. Based on the 2023 SOHBR report, 50% of respondents said they would potentially use their auction purchase as a primary residence, up from 29% in 2022.
While longstanding investors are affected by the added competition in the auction space, this is where you need to tap into your expertise. Be savvy. Remember: Not everyone wants to buy a home.
There is also an increase in people looking to do a short-term rental rather than dive into a purchase. This leaves a huge place for investors in the market. Investors need to track neighborhood property values, ensure their purchase is sustainable and be good at vetting tenants to promote long-term success. Even in this market, there is space for everyone to win.
It is Easier Than Ever
The auction process is simple. Thanks to the latest technological offerings, it has become even simpler. You can now bid on a property in another state and close on the asset within 30 days. Everything can be completed without ever having to pick up a phone or step foot in the state. There is no longer a need to find a local agent. eClosings are a big driver that fuel added traction in the auction space.
Data also is readily available at buyers’ fingertips making the due diligence process much easier. Interactive photos, access to title reports and values of other properties in the area, can all be found with the tap of a finger. This makes buyers comfortable knowing they are making a knowledgeable decision without physically visiting the property.
According to 2023 SOBHR data, 48% of respondents who purchased a home used an eSigning application or closing documents to complete their transaction, while 53% applied for a mortgage online and 25% conducted an appraisal remotely.
In 2023, digital technology advancements made it easier than ever to purchase a property at auction. Tap into that. You can and should utilize the added technology to your benefit.
Sharpen Your Pencil
In 2023, investors are being more particular with what properties they are choosing to purchase.
With a volatile market, it is important for investors to tap into their knowledge of the market, do their due diligence and ensure the property checks all—not just some—of the boxes.
Also, have patience. A down market, while frustrating, has given investors time to reflect on their own processes and find ways they can do things more efficiently.
Remember: Sharpen your pencil, look ahead and make sure the property makes sense in the long-term. It is OK to take your time when selecting your next purchase.
The Right Partner is a Must
Facing what industry experts have said could be one of the toughest winters ever for the real estate industry, it is now more important than ever to find the right partner that has financial stability, along with a team dedicated to the auction space. This is a niche market and investors need someone who knows the arena and can help them maneuver through the process.
In 2024, it is going to be even more critical to partner with the right people who are in it for the long haul, that have longevity and can really help push you to that next level. Find a partner that moves quickly and gets it right. Every day matters. This is why it is important to find a partner who keeps the lines of communication open.
A partner should keep investors updated with the latest happenings on their transaction, if there are any title issues involved and how long it is going to take to get things cleared. You want a partner who keeps you in the loop.
What to Expect in 2024
It is not surprising, given the market and the added comfort people are finding with auction as they become more familiar with it, that there was more interest in auction in 2023 than in years prior.
It is an exciting time for auction as it gains traction that will carry into 2024. There is no slowing down.
The next year will continue to be a very busy year in auction. More properties will come to market and auction is going to be a critical piece of the real estate market, for homebuyers and investors alike.
Even with the added auction competition from homebuyers, investors can stay ahead by tapping into their expertise, utilizing digital advancements in the industry, being patient and focusing on finding the right property that meets your needs, as well as teaming up with the right partner. This is the recipe for success in 2024.
