Winning auction strategies
Firstly, you must be absolutely certain about the property before bidding at an auction. Standard auctions don’t allow for a cooling off period or for conditions such as finance approval or pest inspections. You will also need to be prepared to pay a deposit on the day should you win the auction.
Bargain properties can certainly be found at auctions but the emotion and intensity often leads people to dramatically overpay. Here are four key rules to ensure you secure a good buy:
1. Keep your cards close to your chest
Don’t tell the agent what you think the property is worth or how much you’re willing to pay. Play down your interest in the property as this information will be conveyed to the seller when it’s time to consider the reserve price they set. The less an agent knows and the fewer interested bidders they’re aware of, the less the reserve may be, especially if the vendor is anxious about selling the property.
2. Set your limit and stick to it
There may come a time when agents will push you to go just that little bit higher with the temptation that it might secure you the property. One $1000 bid more might not seem a lot, but where do you draw the line? These extra bids quickly add up and before you realise how much you have bid you have stretched your limit often by at least $10,000. If you don’t think you can stick to your limit, send someone else you trust such as a friend or buyers’ agent to bid on your behalf. Successful investors know it’s all about the numbers so if you can’t secure the property at the price you set, you should just walk away.
3. Wait until the reserve is met
There’s no real point bidding before the property is on the market as it does nothing except play into the hands of the seller by pushing up the price. Be aware that in WA, auctioneers are also allowed to place vendor bids which are bids on behalf of the seller (auctioneers must openly disclose these to the crowd). These cannot be made after the reserve has been met. And even though dummy bids are illegal (false bids used to artificially inflate the price and not made by a genuine buyer or disclosed by the auctioneer), that’s not to say they don’t still happen. These just bump up the price further and give other bidders the impression of more competition pressuring them to bid higher. The less activity that occurs by bidders, the better it is for the potential buyer as the vendor will be feeling the pressure and be less resolute in sticking to their original price expectations, whether that’s during the auction or afterwards should it be passed in.
4. Be in control
Position yourself close up at the front or side of the auction to give you the opportunity to watch the crowd as much as the auctioneer. This will help you assess the competition. Portray a cool, calm and collected exterior regardless of how you really feel on the inside and bid with total confidence. Bid immediately after another person has bid to intimidate your competitor who may assume by your actions that you have plenty of money to spend and will secure the property at all costs.