Tips for bidding at auctions

Auctions can be intimidating, even for experienced property buyers. If the thought of bidding at an auction fills you with dread, follow our tips and brush up your bargaining skills—you just might end up with your dream home.

For many home buyers, bidding at an auction is fraught with anxiety and unknown factors:

• What price is the vendor really expecting?
• How much competition will there be?
• Is the agent underquoting to entice me to the event?
• What if I fall in love with the property and lose the auction?

These are emotional, stressful concerns, and while they can be valid, they can also be overcome.

How?

Do your homework — it’s all in the preparation!

1. Research the local area

The local housing market and the property itself have the greatest impact on the sale price, and there’s not a lot you can do about those. But if you have done your local research, that is, inspected as many similar properties in the area as possible, you’ll have an idea of what the local market is doing.

Attend auctions in the area and focus on what the house actually sold for, not the asking price. Look at the land size, the age of the home and its state of repair. Also look at the neighbourhood; are there schools nearby, public transport, shops or doctors?

2. Secure your finance

Speak to your lender and get pre-approval. That way, you’ll know your limit and when to walk away.

Try to set an upper limit that’s not a round number. For example, if you’re considering a budget around $600,000, set your limit at $603,000. Most people have a round number in mind so if you can push to a couple of extra thousand, it could be the winning difference.

You’ll need to be ready to pay a deposit if you win the bidding, so make sure you’re in a position to do so.

3. Control the bidding

When the bidding gets underway, try to control the increments. For example, if you’re thinking of bidding $500,000, start at $495,000. This is more likely to set increments at $5,000 instead of $10,000.

4. Wear your amateur psychologist’s hat

Position yourself so that you can watch your opponents’ body language, particularly if they are a couple. They may turn to one another to discuss the bidding. This could be a sign of anxiety and an indication that they’ve reached their upper limit.

If this is the case, now is the time to deliver your knock-out blow: a strong bid designed to close down the competition.

Remember, though, that if you’re watching your opponents, they’ll be watching you. Bid confidently and assertively. If your partner is with you, don’t look at them. Keep a poker face—even if you’ve fallen in love with the home.

If the property is passed in and you’re the highest bidder, you’ll be in the best position to negotiate with the vendor’s agent after the auction. It helps, at this point, if you have your own agent to negotiate on your behalf.

Auctioneer tactics

Auctioneers love their work. It’s a game of tactics aimed at pushing up the price, and every auctioneer has their own style.

While doing your research, attend auctions and get to know individual auctioneers’ tactics. Learn to read the signs – and don’t fall for them.

Sign # 1 Raising the gavel. This tactic says: We’ve met the reserve; things are about to get real. Make no mistake, things were real before this. Keep your cool and remember your walk-away price. If you’ve done your homework, you’ll know whether the reserve is unrealistic or not.

Sign # 2 Calling the property, going once, twice… This is designed to create a sense of urgency. The subliminal message is: The bidding is coming to a close—make an offer now or you’ll miss out! Again, keep your game face on and remember your finance limit.

On the plus side

Auctions don’t have to be scary. Consider the following:

• They are the most transparent way to buy a property.
• You know exactly who your competition is.

Base your bidding on your research and your financial position – not your heart. If your nerves are getting the better of you, appoint an agent to bid for you, or ask a trusted friend or relative.

Be mindful that if you’re nervous, the other bidders will be, too. Detach yourself from your emotions and approach the event in a cool-headed, businesslike manner.

The auction is there to be won, but if you’re not successful, mark it down as experience and move on. Something better might be waiting just up the street.