Are you interested in knowing how to bid at auction? This series will help you better understand how to equip yourself to secure the best outcome at a property auction.
This is the first post in a two part series.
Bidding at auction isn’t a walk in the park. Having a well-planned strategy is essential to securing the right property at the right price. Experience plays a huge role in bidders’ chances of success at auctions, so it is essential that you not only arm yourself with relevant information for the auction itself, but also plan your approach should the property be passed in and you need to start negotiating on the fly.
Practice makes perfect
Get along to as many auctions as possible and ensure that you are well versed in the required rules and regulations for the state where the auction is being held. For example, do you know the difference between a reserve and vendor bid? Attending auctions also helps you to get a feeling for the emotions at play and different bidding strategies.
Auction regulations by state:
Auctioneers are highly skilled and aim to maximise the purchase price for the vendor, so going along to one or two auctions likely won’t cut the mustard. You should try to get to 10 to 15 auctions in your target area to get a true feel for what to expect from the auction process.
Know the value of the property and set your budget. I personally like to set my budget at a multiple other than 10 or 5. This gives me a bit more flexibility on the day to go a little extra when things are coming down to the wire i.e. my ceiling price might be $303k or $307k as opposed to $300k.
At the end of the day, you need to remove emotions from the equation, bid within your means and hold true to your property investment strategy.
This should go without saying, however prior to auction you should have sought legal advice on the agreement for sale from a solicitor or conveyancer, arranged your finances (written loan approval as well as deposit of approximately 10% of the purchase price) and had a building and pest inspection conducted on the property.
You don’t actually have to attend the auction yourself. Having a professional bid on your behalf via a letter of authority or power of attorney can provide a multitude of benefits – I have previously written about using a buyer’s agent to bid at auction here (using a buyer’s agent to bid at auction).
Some bidders prefer to remove themselves from the auction to reduce emotion and also in the belief this might intimidate other bidders.
Position at auction
Take a position where you can hear and see everything as this will help you to gauge the body language of the competition and get a better understanding of their limits. Vice versa, if you are concerned that you may give away your game plan, try and find a spot at the back where you can see other serious bidders but they can’t easily observe you.
Bid like you are walking away with the property. A quick and confident counterbid gives the impression you have plenty left when in reality you might be at or near your limit. Be assertive and don’t hesitate to slow the bidding down with small increments. Respect the auctioneer – they will always come back to you if you insist on lower bids.
If you have a fair idea of what the reserve price will be and know it won’t be passed in, don’t let the bidding drag. For example, if you know the reserve is $600,000 and someone starts at $450,000, jump to 10-15% below the reserve, say around $540,000.
See the next post in the series here – How to bid at auction: What happens if the auction is passed in?