Insider’s Guide to Buying at Auction
You have found your dream home, your mortgage loan has been approved, now you just have to win the bid. Bidding at auction can be emotional and stressful. It can be a roller-coaster ride where, just as you think you have beaten the competition, other bidders re-enter the fray or new competition emerges. There are many different strategies that can give you an advantage at a public auction.
Dress to impress
Wear a suit to create the perception that you have the money and budget to beat the competition.
Park your prestige car (if you have one or can borrow one) at the front of the property so that you can stand next to it and create the impression that you are ‘cashed up’ and have the funds to buy the property.
Position yourself towards the front of the auction near the auctioneer
This gives you a bird’s eye view of your competition so that you can see who you are bidding against.
Ask a question at the beginning of the auction to direct attention towards you
Specifically one that may make other home buyers hesitate. For example, has the body corporate raised any special levies? What about the development plans next door? Is the car park on title? Hopefully these questions may unnerve inexperienced bidders.
Keep your body language and gestures positive and confident at all times
Try to make direct eye contact with competing bidders with a confident ‘ice-cool’ stare.
Ensure you have a pre-auction limit and stick to it
There is no use getting emotional at an auction and overpaying by tens of thousands of dollars resulting in frightening home loan repayments.
Ask the agent how many contract requests and building reports have been commissioned.
If it’s likely there will be a lot of competition, wait for someone to make a low bid before placing a higher one about $10,000-$20,000 below your estimated reserve price. For example, if the agent is quoting $270,000-plus and someone opens at $250,000, you should increase the bid to $300,000 to show you mean business. This also cuts out the bargain hunters, as even lower bidders can get emotional and increase their bidding levels – which has a snowball effect of increasing everyone else’s budget.
Ask the auctioneer “Is the property on the market? Has the reserve been met and are you selling?”
If all goes well, the bidding will stall and the auctioneer and agent will go inside for a break. They may try to convince the vendor to lower their reserve price and put the property on the market for an unreserved sale. (Hopefully, they tell the vendor that there are bidders who won’t bid until the property is on the market.)
Call out all your bids with full numbers
For example instead of ‘$1,000’ call ‘$301,000’ so other bidders hear exactly where the bidding stands. Call out all your bids confidently and assertively like you are not going to stop and will continue until you buy the property. Volley bids straight back without hesitation so it looks like you won’t stop until the property is yours.
Break down your bids to slow the bidding if required
For example, if the auctioneer asks for $5,000 bids, offer $1,000 or $2,500 bids so that the momentum is slowed.
Use knockout bids
Double or triple another bidder’s amount to try and psyche them out. You can also pretend you are out and wait until the third call, before coming in again with a knockout bid.