I have been to hundreds of auctions in my time and find it fascinating to watch the ways different people bid. Auctions can be stressful for everyone involved and often buyers surprise themselves: either by bidding more or less than they thought they would. Some buyers register for auctions and never even end up bidding (which I do find odd…). Others get caught up in the emotion and seem to forget about what they are even bidding for.
There are five particular types of people who can be formidable opponents at auction. It’s a good idea to be aware of these in the event that you ever come across one because they will either pay too much for the property or they will make sure someone else does.
1. The bank of mum and dad
Baby Boomer (or even older Gen X) parents are keen to get their Gen Y offspring safely onto the property ladder. Their numbers have risen in the recent property boom, driven by the increase in value of their own homes. After registering for auction, it is usually dad holding the bidder’s card. Sometimes they are a little smug because they know that their kid has an advantage over any poor first home buyer without parental help. When the bidding get to high levels, dad often continues “because he can” and I have even seen sons & daughters trying to stop him to no avail. This is one very emotional bidder indeed!
2. The testosterone bidder
I think we can see a bit of a pattern here, for this is another male bidder. The alpha male bids with a “win at all costs” attitude. This buyer hates to lose, but the paradox is that in bidding the way they do, they do in fact lose something: they lose sight of what they are actually buying! This bidder is difficult to take on because they don’t seem to worry about affordability.
3. The selling agent bidding for their client
Some buyers ask their friendly sales agent to bid for them because they are not confident with auctions. It makes sense: their agent is an expert (at selling property though, not buying) but often they are over-confident at auction. I know this from experience as I had to “untrain” myself when I switched from being a selling agent to a buyers’ agent.
Selling agents often bid for their clients when they know that there is a new listing in it for them. There is a bit of a conflict of interests here, because obviously they want their client to be the ultimate buyer. Consequently, there is unlikely to be any critical analysis of what the property is actually worth.
It’s in the DNA of a sales agent to think that being the highest bidder is the best outcome. They tend to believe that they need to bid hard and high and knock out all the other buyers. Sometimes this is a valid auction tactic (we use it when appropriate) but these bidders tend to use the same approach at every auction they bid at.
The only good thing about bidding against one of these bidders is that they should have a written limit, but if their client is with them (or on the phone), they will probably encourage them to exceed it.
4. The bidder who just missed out
This buyer is still licking their wounds from the auction they missed out on only last week. They are full of regret over “the one that got away” and in their forensic review of that auction they have determined that they need to bid harder next time. Whatever it takes, they don’t want to miss out again, they really want to avoid reliving that pain.
5. The buyer who just sold
When someone has just sold their home (without buying first) they are immediately faced with the prospect of renting until they find a new home to buy OR buying something ASAP and avoiding a double move. The weeks immediately after their sale are when the pressure is greatest on a buyer. Their defences are down and they are most likely to compromise in ways they would never have considered only a short time earlier.
These buyers truly believe that renting is the worst outcome, so they will bid furiously in fear. And this is really sad because renting for a while is far preferable to buying the wrong property and/or paying too much.
For all of these bidders the prime motivation is WINNING!
They all want to win for different reasons but the common denominator means that often the value of the property is secondary to the outcome. They are dangerous to take on and it’s crucial that you have a clear idea what a property is worth before you bid so that you avoid getting into a bidding war. Sometimes it’s better to walk away.
First published: – 18 April 2016
Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.