There are some who show absolute confidence and poise with nothing appearing to throw them or ruffle their determined feathers.
In reality though, I’ve rarely come across people whose first attempts to bid at auction didn’t come with sweaty palms, nervous mannerisms and an overwhelming mix of stress, confusion and excitement.
However bidding at auction can actually be enjoyable… by about your tenth event!
For this reason, first-time bidders make mistakes that will upset their strategy and may result in missing out on what should have been an excellent first buy.
Here are five beginner auction errors and how to fix them.
1. Failing to prepare
“By failing to prepare you are preparing to fail” Benjamin Franklin.
This particularly applies to bidding at an auction. The pressure of competition can make the average person behave strangely. If you’re one of the final bidders you’ll feel an adrenaline rush and quickened heart rate together with an internal monologue that’s screaming “What do I do now?!”
That is not the time to make the decision about your absolute upper price limit.
Well before the auctioneer calls everyone together, smart buyers know at what point they are going to pull out – absolutely, positively and without regret.
Do your sums well in advance for every property you’re interested in.
Know what you can afford to borrow and do your research as to what the specific property is worth.
No later than a day before the auction, you (and any significant other) must have a comprehensive discussion about what you’re prepared to pay. Take your time and, if this is absolutely the home or investment for you, find your absolute limit – it’s that figure where literally a dollar more is a dollar too much.
Also accept that you might be outbid – that’s OK. There will be other properties in the future and each auction is a learning experience.
2. Not knowing your State/Territories Legislation
Be knowledgeable about your state or territory’s rules relating to auctions.
For example, arriving late on the day and raising your hand to bid as you close the car door is not on. While bidders don’t need to register in Victoria they do in many states, including New South Wales and that includes producing identification and other details. Also, know your State’s ‘cooling off’ rules.
As proceedings approach the intense finale, under-educated bidders can become more stressed by unfolding events.
How will you know when the property has reached the reserve?
Will the auctioneer go inside to talk to the vendors?
Is the property “on the market”?
Take some time to learn about what happens if the property passes in. Did you know in many jurisdictions, the under bidder doesn’t not automatically have the first right of refusal?
Also be aware of the seller’s specific requirements too. What do they expect in terms of a deposit? Do they want an extended settlement period?
Here are two good ways of approaching this:
Firstly, attend plenty of auctions before you bid so you can see how different scenarios play out.
Secondly, talk to agents and auctioneers, particularly those selling your desired property. They will happily answer questions about their auction style and the particulars for the property you like
3. Bidding Strategy is Complicated
When the moment arrives it’s best to be front and centre and make yourself be heard. You must ensure the auctioneer knows you’re a real contender in the sale and you’re there to win!
There are also some who believe the best strategy is to hang back and make a “knockout bid” towards the end. It’s a great strategy but very dangerous for novice bidders.
It gives other bidders a chance to build their confidence during proceedings and your “knockout” might actually be a vast overpayment for the holding.
Also, think about whether you want to open the bidding. If so, what will you offer? Most sellers expect a first offer below reserve, but come in too low and you might be greeted by a withering comment from the auctioneer that will zap your confidence.
Just like knowing where you’ll stop, have a think about when you’ll likely enter the fray too. You can see that the strategy of bidding is a complicated one.
4. Believing the auctioneer has the balance of power
The fact it’s the auctioneer and selling agent who are most under pressure at an auction may surprise first-time bidders.
The auctioneer is trying to get the highest possible price for the vendor and that means they’re actually beholden to the bidders at the auction.
If agents “rush” you for quick decisions or push for a fast counter bid, take a moment to think. If they believe you may make another bid, they’ll wait for you to decide.
This is also the time to employ your well-practised poker face. Try to give nothing away if you’re stressed. Relax and let them feel the pressure.
While you should be respectful of the process, telling an agent you’d like a moment to gather your thoughts is fair enough too.
Take your own pace, not the auctioneers.
5. Compliance on increments
Auctioneers can request an increase in bidding increments or deny smaller ones but that doesn’t mean you have to comply especially towards the end of the auction.
Auctions can come down to miniscule margins. I’ve seen events run at $100 bids – it’s excruciating for the crowd but could mean savings in the thousand for the eventual buyer.
Auctioneers will try and dictate your bid margin – they may knock back margins that are too low in the early stages of an auction – but they’ll always come back once bidder numbers start to thin.
Don’t succumb to the auctioneer’s suggestion of a ‘knockout’ bid. During proceedings there may be times where an increased bid margin conveys deeper pockets but this is better kept to more experienced bidders.
Everyone, especially your competition, has their limits and the best strategy is to be one step ahead when the hammer falls.
Bidding at auction may seem daunting to novice bidders but experience brings confidence. Unfortunately, in the meantime you may have missed out on some excellent properties due to that lack of experience.
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Our professional auction bidders will fully plan and execute the bidding strategy on your behalf, giving you an enviable edge over your competitors – providing you with peace of mind. We have 30 plus years’ experience of the Melbourne property market and use innovative strategies to secure the winning bid at auction – we push boundaries so your interests always come first and exceptional results follow.
Why not draw on our expertise so that your biggest worry on auction day is what brand of champagne to crack open in celebration of a successful outcome.
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