Auctions are a great method of snagging a property for a bargain price. However, actually winning an auction is not as easy as it seems. If you’ve ever watched an auction on television, it seems like a fun and vibrant event. Dozens of people all trying to outbid each other to win the property.
To new-comers, an auction might seem like a frantic free-for-all. Yet, seasoned bidders understand how an auction works and how to use their advantages to win an auction.
“Winning” An Auction Sometimes Means You Don’t Walk Away As The Highest Bidder
The first and most important concept to understand in winning an auction is to accept that you won’t always win and that is okay. Sometimes you “win” an auction by backing down and not forcing your bid. If you become too emotionally attached and try to force your way as the higher bidder, you could potentially pay a lot more than the actual value of the property.
This is a common pitfall that new bidders and even seasoned bidders will fall into. Knowing when to step away from a bid war can “win” you an auction because you avoid being trapped into paying more than the property’s actual worth.
I hope that every serious bidder will take the time to properly inspect the property they are bidding for. If you don’t inspect a property how can you expect to estimate its value and determine how much you are willing to pay for it?
Show up early to give yourself adequate time to closely inspect the entire property. It is always better to be safe than sorry. Check for damages and potential problems that exist within the property.
You can arrange an inspection with the property agent. If you are truly serious about a property then it could be worthwhile to get a licensed building inspector’s opinion on the property. Pest and architectural inspections should also be high on the priority list. You don’t want to buy a property that has faults or damages.
If you are new to auctions and aren’t familiar with how they are run or the etiquette of bidding, then attending other auctions to practice will teach you a lot. All the tips in the world won’t help you if you don’t know how to place a bid.
If you are unable to attend practice auctions then watching a live auction on YouTube can offer a similar experience. Take note of the auction format, how people bid, common bidding etiquette and interesting strategies that bidders might use.
You can also rehearse your bidding at home in front of the mirror or with your family. It may sound stupid, but putting in that extra practice helps you feel more confident going into an auction.
Just with any big financial commitment in your life, you need to determine your budget. Always aim to spend within your means and never reach too far out of your comfort zone. Not only will this help you avoid financial trouble, but it will help you plan out your bidding strategy.
If you know exactly how much you are willing to bid at the auction, then you can work out a plan to win the auction at or below your designated budget.
A reserve price is the minimum amount that the seller is willing to accept as the winning bid. The reserve price is predetermined by the seller. During the auction, the auctioneer will most likely start the bidding below the reserve price to encourage bidding. But, as the auction draws closer to its conclusion, the auctioneer will try to meet the reserve price or cancel the auction.
The reserve price is generally not publicly disclosed, but by estimating a property’s value you can guess the reserve price. Not all auctions have a reserve price. Bidders prefer auctions that don’t have a reserve price because you can win an auction at a bargain price. However, most sellers want to make sure that they don’t sell their property for a price that is too far below their expectations.
The most common mistake bidders make when attending an auction is to have their judgement clouded by their emotions. When you first show up to the auction you may feel like you can view everything with an objective perspective. But, as you inspect the property you may fall in love with it and have your emotions cloud your judgement when it comes to the actual auction.
Also, live auctions are meant to play on emotions. The auctioneers wants to get emotions involved so that they can sell at a higher price. Too many people have fallen victim to their emotions during an auction, don’t be one of them.
Learning to control your emotions is a skill that will help you in all areas of life. There are a few steps you can take to prevent being swayed by your emotions. First, you must recognise when you are becoming too emotionally invested in an auction. Maybe this is your 10th auction that you’ve been to and are still struggling to win an auction. Or, you’ve just fallen madly in love with a property that you just inspected.
Recognising when your emotions are going to affect your bidding is the first step in preventing a bad bid or decision. Then, you must be disciplined and fight the urge to make a reckless decision. Don’t try to go all-in on an auction in an attempt to win it, or bidding way past your budget to secure the dream property you’ve become infatuated with.
This point relates back to the previous concept about not being swayed by your emotions. Live auctions are designed to play on emotions and energy to create the sale. The auctioneer injects a high level of energy into the people and the room in an attempt to encourage bids and action from the bidders. He/she also can apply pressure to bidders to continually raise the price. Don’t get caught up in the auctioneer’s game to get you to bid higher than you really want to. Learn to say no and be assertive in your decision to not continue bidding.
You can’t do much to control the influence of the auctioneer. They will control the tempo and flow of the auction and there is not much you can do as a bidder to really change their actions. But, by staying level-headed and not falling into the game of the auctioneer you can remain focused and bid accordingly to the circumstances around you.
A rookie mistake that many bidders have committed is to bid against themselves. It can be easy to lose track of the latest bid due to the fast pace of an auction, and you could end up bidding against yourself. Don’t lose focus and place full attention on the auction when you are bidding.
Market research is your #1 tool when preparing for an auction. Doing your research will help you establish a foundation for the rest of your auction strategy. If you are able to estimate the value of a property by researching similar properties within the area then you can work out your budget and how much you are willing to bid. Determining the value of the property and your maximum bid will make bidding much easier. You will know where your exit point lies if the bidding gets too heated.
Aside from doing market research for prices and property value, you should try and find out as much as you can about the particular property you are bidding on. Are you bidding on a foreclosure auction? The type of auction and property can have an affect on its overall value and asking price.
The best way to avoid being seduced by your emotions during an auction is to bring someone that you trust. Preferably don’t bring someone from your immediate family because they will also bring some emotional bias with them as well. A close friend or distant relative is a good choice.
They will keep you accountable to bidding within your budget and also provide a voice of reason when you get a bit caught up in the emotion and energy of the auction. A third party can also provide a second perspective on the property. This can come in handy when scouting out potential problems or features you may have overlooked.
You can also employ the professional expertise of a buyer’s agent who will act on your behalf during the auction. They are experts at auctions and will use their professional skills to help keep you avoid making a bad decision.
There are an array of different bidding strategies that you can use in any auction. There is no one bidding strategy that will win you more auctions. You should take each strategy into consideration and use them when the situation presents itself
Common bidding strategies include:
Dressing like you mean business can help earn respect from other bidders. Presentation and first impressions can play a role in helping you win an auction. Dressing up in a nice suit gives the perception that you have deep pockets and lots of resources. This could dissuade other bidders from challenging you if they think they won’t be able to win against you.
You are playing on people’s psychological thought process and perceptions in order to gain an advantage. Also, some experts believe that you should avoid taking your family to an auction as your competition may think that your finances are strained by school fees and other family expenses. Therefore, they will be more willing to challenge your bids because they think they have a higher chance to win against you.
Try to position yourself where you can see the auctioneer and the rest of the room. Somewhere in the middle along the wall can be a good location. You should avoid standing all the way in the back or right up front. You want a position when you can gauge the body language of the other bidders but also keep an eye on the auctioneer for instructions or updates.
Learning to read body language is a subtle skill that requires experience and practice. Look for visual or verbal cues that could provide some insight into the thought process of another bidder. Can you hear verbal “umms” or “ahhs”? These are an indication that they could be very close to their maximum bidding limit and you could win the auction with one more decisive bid.
Not everyone is as good as hiding their emotions as they think they are. However, if you really do go up against another bidder that is completely stoic, there’s not much you can work with. At this point you will have to rely on your strategy and hope that the auction goes your way. If not, then just back out and try another day.
Bidding with authority and speed gives your opposition less time to process and think about their next move. You want to take them out of their comfort zone so you can capitalise on their mistakes. As you attend more auctions you will become more familiar with the format and etiquette of an auction.
If you seem like you know what you’re doing and you act confidently, it puts other bidders in an uncomfortable situation. To really press your advantage you need to know your budget, limits and really nail the persona of a confident bidder. These things will probably not come naturally to most bidders, but as you become more experienced in auctions you will start to exude these qualities.
As mentioned before, body language can give a lot away. When you bid with confidence it shows that you have done your research, have your finances in check and are ready to challenge other bidders for the property.
This can scare the competition away. Also when you bid, you want to call out the full price. This can help you nudge out that small little advantage while still staying under your limit. Auctioneers can sometimes round up the price, so clearly stating your full price will prevent this from happening.
Auctions are a great way of buying property at cheaper prices. Winning an auction is part strategy, luck and persistence. Things will not always go your way and you have to accept that. However, there are a few things you can do in your next auction to get an advantage and maybe win that property that you’ve always wanted.