You’ve spent months researching the market and attending open for inspections, and now it’s time to get down to business.
Chances are, if you’ve committed to attending an auction, you will have already spent a lot of time visualising how your new life inside that property might look – and the future of this dream-like fantasy is what’s at stake when you pick up your paddle.
Add in the natural pressure associated with competition and it’s easy to understand why auctions are often fraught with emotion. Which is why it pays to be prepared.
With that in mind, we asked Damien Cooley, managing director of Cooley Auctions, to break down how buyers should bid at auction.
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Regardless of whether your state requires you to pre-register, you will need to show ID to the selling agent on the day of the auction, so that they can take down your details and hand over a paddle.
You will need to show the auctioneer your paddle every time you bid.
Once you have your paddle in hand, stand in a position that allows you to keep an eye on the competition.
According to Cooley, non-verbal cues offer valuable glimpses into a rival’s buying power.
“One of the biggest mistakes buyers make is they don’t watch their competition,” he says.
“If we’ve got a bidding sequence that’s going $800,000, $810,000, $820,000, and it slows down, and a buyer tries to go $825,000 and they’ve got their mum and dad with them and they’re all looking at each other and having a conversation – there’s a very good chance that that buyer has reached their limit and they’re discussing with the family whether they’re out, or whether they should go another $5,000.”
In the event such a buyer comes back with “a desperation bid of $5,000″, Cooley recommends immediately placing a higher bid – a signal of intent that he likens to a knockout blow.
Momentum plays a big role in determining the outcome of an auction. Generally, the faster the bidding, the more likely buyers are to get swept up in the emotions of the occasion and feel pressured into placing higher bids.
Cooley therefore recommends bidding in odd increments, so that the auctioneer is forced into doing more challenging arithmetic.
“If the auctioneer is asking for a $10,000 bid, you can give them $13,000,” he says. “Give them a few curly numbers. You’ll be surprised by how many auctioneers will struggle to add them up. That will slow down the bidding.”
If you kick-start the negotiation, “start with $795,000, instead of $800,000, as that makes it easier to get the bidding going in $5,000 bids,” Cooley adds.
If you’re competing against a high number of bidders, you might decide that starting the auction with an aggressive opening bid is a good way to determine who the real competition might be.
But in a softening marketing, Cooley says it’s safer to pull your punches until the end draws near.
“I would say it’s more important to bid confidently at the end of the auction than it is at the beginning,” he says.
“The reason being is you don’t want to… send a message too confidently to the agent and auctioneer that you’re willing to buy at any cost. Sometimes that can work against you.”
In any negotiation, it always helps if the key players like you.
Which is why Cooley suggests exchanging pleasantries with the agent and the auctioneer prior to bidding.
“Don’t be afraid to introduce yourself to the auctioneer before the auction,” he says. “Use the agent’s and auctioneer’s names and be a good person.”
The way Cooley sees it, getting in the auctioneer’s good books can only improve your prospects.
In most states, if a property passes in (i.e. is withdrawn from the auction after failing to meet the vendor’s reserve price), the highest bidder gets first right to negotiate a price with the seller.
When this happens, buyers shouldn’t fall into the trap of thinking that they’re the only person interested in buying the property, and that the chips are entirely stacked in their favour during the ensuing negotiation.
While the property might have failed to meet its reserve at auction, other buyers will likely attempt to buy it if it goes back on the market – and a seller is highly unlikely to budge on their reserve, according to Cooley.
“There’s a misconception that buyers are bidding against themselves when a property passes in… but that’s not the case,” he says.
“Ultimately, what’s happened is the auction has got the point where it’s stopped. Your price is not a price the seller will sell at. Full stop. It’s no more complicated than that.
“If you want to buy the property, you will have to increase your bid…. don’t be unnecessarily tough during the negotiation.”