How Do We Know Online Bidders Real?

Dec 17, 2016 | About DreamDirt, Land Auctions, Online Land Auctions

Jason Smith

Jason Smith

Auctioneer, Land Broker, Founder

Jason holds Auctioneer or Land Broker licenses in Iowa, Missouri, Minnesota, Nebraska, and South Dakota.  His DreamDirt team is comprised of auctioneers, land brokers, and realtors. They specialize in farmland sales primarily serving the heirs to family farms all across Iowa and surrounding states. We offer risk-free selling experiences and work hard to maximize the value of our client's assets using highly effective auction methods, technology, and powerful advertising.

Email: | Phone: (515) 537-6633

Online bidding has become an accepted practice in nearly every part of our world.  With Ebay auctions dating back over 20 years now and thousands of other platforms popping up since online bidding has become the norm and today’s advanced auction firms have added online bidding to compliment their live auctions.  The convenience it adds for buyers and the enlarged buying pool it brings for sellers certainly makes it the single most important change in the history of the auction industry.

In a recent farmland auction an online bidder was the top bidder at the end of the auction and as you can imagine some buyers can be skeptical of online bidders the same way they have always been skeptical of phone bidders.  Notice I used the word “some” because it is for the most part accepted by bidders but there remains holdouts that probably would be skeptical of even a stranger in the room at a live auction.  I think its safe to say that the online bidders really is an improvement on phone bidders.  A phone bidder was typically somebody that couldn’t make the live auction or didn’t want to dedicate the time to travel maybe believing they would not be the top bidder anyway, or somebody that wanted to bid anonymously afraid other bidders would outdo them just out of personal feelings.  Today those phone bidders have been pushed to online bidding because its a much more controlled process that we can manage, plus it makes their bidding activity public where other can see it happening rather than on a private phone call between a ringman and the bidder.

Online bidding for farmland auctions is not widespread and DreamDirt was the first to add online bidding to every land auction in Iowa and now to other states we serve to ensure our sellers had full participation in their land auctions.  Even with technology so accessible and cost effective many still refuse to add online bidding to their land auctions.

At the recent auction I mentioned after the auctioneer pronounced the farm sold one of the onlookers walking out of the room that had not bid in the auction quipped to one of our team members “what are you going to do one day when your online bidder isn’t a real person”  Now its hard to know exactly what the question meant without questioning him further but he walked off with the satisfaction he’d said what he wanted to say and we didn’t get the opportunity to answer his question for him so we thought this might be the best way to answer that question so everybody gets the opportunity to learn from his question.

First, the question is a legitimate question and if you are not involved in the auction industry it may seem that simple that we do not know the people bidding online but certainly it is a naive view.  The simple answer as it related to that auction was we knew the online bidder more because he’s a repeat buyer.  He’s actually a well known buyer and farmland investor that we have sold to before so his identity was very easy to know.  Many other times people may register for a land auction that we do not know so we have a process that we go through to verify their identity.  Today’s world offers us more options than ever to verify the identity of an online bidder and after some discussion among ourselves we decided its not in our future clients best interest to lay all of those things out publicly in a blog post but some of the most obvious we can discuss.  Our intention is to help educate the public, both buyers and sellers about the process of registering as an online bidder in a farmland auction.

The process is not always the same when verifying bidders identity and can be dictated by a seller clients wishes.  For example, a seller may wish to have every online bidder present some form of written bank letter of credit signed by a loan officer at a bonifide known financial institution that can verify the identity of the bidder.  Some may choose to require a copy of the persons drivers license.  Some may require a signed notarized written affidavit to verify identity.  Sometimes we may require those things when we believe its necessary, or may require a bidder to use a credit card to register so we can verify the card to verify their identity.   More rare but sometimes used, a bidder may be required to pay a refundable money deposit to bid at auction.

When we receive a registration in our email from a bidder to bid online the very first step we take is to call the phone number in the registration and visit with the person if they have not contacted us prior to registering which often happens. Its not unusual for us to have actually met with the potential online bidder to show them the farms and discussed online bidding prior to the actual sale day.  If we have not met with the person then this phone call gathers information thats used in later steps of verifying identity.  Once we have completed our verification and we are confident the bidder is a legitimate bidder they are given a spending limit in our online bidding system that will match information we have verified or a bank letter of credit.

Once a persons is verified for identity and has received a username and password for our system along with a spending limit which can be in the millions of dollars the process does not stop there.  Our auction crew on auction day is typically made up of 5-8 people including the auctioneer calling bids and the online auctioneer manning the online bidding system taking bids from the Internet.  2-3 ringmen will also be working on the floor.  These are the people you see in the auction spotting bids and yelling loud to relay them to the 2 auctioneers.  One of those people is managing the entire auction process, what we call the auction manager.  That auction manager is charged with working between the seller and the auction team as well as between the buyers and the auction team.  That person knows every detail of the property being sold, the live auction, the online auction, the legal aspects of todays auction, the sellers wishes and is also the person that will have talked with every online bidder prior to the auction and will know every one of them by name.  During the auction you will often see that person use their phone to make phone calls.  You know how the ringmen go around the room often visiting with bidders asking them for a higher bid?  That is mimicked in the online auction side as well.  We email those bidders the morning of the auction to remind them of the auction start time, but during the auction we also call those bidders just prior to auction start for several reasons including verification of their bids.  When an online bidder bids they will get a phone call from the auction manager when they are outbid to make sure first they know they are outbid and because we are calling the known phone number for that verified account we can ensure its the right person bidding.  There will be NO argument later that the person did not actually bid.  Additionally, our bidders are connected to the online auctioneer using the type chat function in the software to communicate directly with that person and verify bids or letting them know they are outbid so there is constant communication between the online auctioneer and the online bidder the same way there is between the onsite bidders and the onsite auctioneer.

This process continues through the auction until the land is pronounced sold by the auctioneer.  If at that time an online bidder was the high bidder their bid card number, name and town is announced to the live crowd which is more information than we provide on a live bidder in the crowd who would only be recognized by the auctioneer pointing at the person as the auctioneer pronounces the farm sold.

So how does this compare to our verification for live onsite bidders?  In a typical farmland auction bidders walk in, sit down and are allowed to bid in most farmland auctions across the state.  This is a very traditional situation and most people in the room know each other and verifying identity has never been an issue. Sometimes a stranger to everybody appears and they will get a visit from the auction staff who are looking to identify the person.  Sometimes a seller may require a bank letter of credit but that is very rare for a live auction.  Today DreamDirt registers onsite bidders using a drivers license and not necessarily to identify bidders even though that is an effect of it, but we do it because thats how our auction management software registers bidders, by scanning a drivers license automating the process for us and making record keeping much more simple.  When a bidder presents at a live public auction to bid on farmland our clerks will ask them for a drivers license, scan it and issue them a bid number.  The registration process for a live onsite bidder takes around 4 seconds per person because scanning the license makes it that quick.

So lets look back at the original question.  “what are you going to do one day when your online bidder isn’t a real person”  The truth is, its impossible for an online bidder to thwart the system and place fake bids by    bidding online.  We even go a step farther and have made it impossible for an online bidder to argue they didn’t bid or didn’t mean to bid because in addition to verifying their identity and capturing their IP address we also verified each and every bid coming in with the auction manager and the online auctioneer. The truth is, we actually do much more to verify online bidders identify and information than we do onsite bidders that simply supply a drivers license.

I’ve explained this process to people before that were curious or nervous about the process of online bidding and the typical response is “wow I had no idea there was so much to it” or “thats actually pretty impressive that you guys are managing so much at one time, from the bidders perspective you don’t see that happening”  All of this happens very quietly, our team is very experience at conducting auctions with online bidding and each person knows and understand their functions and how it relates to other team members functions along with the right steps to take when they have to.  We do not put inexperienced people into roles until they have the necessary experience from shadowing to be at 100%.  A seller deserves the absolute best representation and buyers deserve a transparent smooth buying experience at auction.  Online bidding has helped us as a professional auction service to do just that.  A process that is fair, open and transparent for buyers always results in the best results for a seller.

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