We speak to so many buyers about auctions – most hate them – and there’s a myriad of opinions on how to best handle them. When bidding for our clients we take into account many variables including who the auctioneer is, who the selling agent is and how clever they are at auction negotiations, how busy the inspections were and what the vibe was, information gleaned from the selling agent about vendor motivations, likely competition levels and, of course, what the property is worth.
Here are just a few of our ideas – but don’t try them all at once!
Remember that every auction is different and one technique will not be useful in all scenarios.
- Have a clear idea what your budget is and what the property is worth to you. This is the golden rule. Do not deviate from this and you should not get drawn into a bidding war that will result in you overpaying;
- Try being the first bidder. This goes against conventional wisdom, which is not to bid until the property is called “on the market”. You have a better chance of controlling the auction if you start it with a strategic bid. But that is the key – this opportunity must not be wasted;
- Don’t wait until the property is called “on the market” to bid. How is it ever going to reach reserve unless people bid?? Seriously, we have seen plenty of properties sell under the reserve at auction after a bit of frantic negotiation between agent and vendor. And not all auctioneers will call the property “’on the market”, so you need to be careful here;
- Stare down your opposition. A confident stance can do wonders in out-psyching other bidders and making them think you have bottomless pockets. We see many would-be buyers stop bidding prematurely because they believe the other bidders will stop at nothing.
What if it passes in?
With clearance rates dropping there will be more chance of auctions not reaching the reserve price. So what do you do if you are the highest bidder and the agent is encouraging you to increase your bid? It all comes down to what the property is worth. We often try to negotiate a deal then and there, but only if the ultimate price represents good value. If the vendor is holding out for too high a price, then it is worth letting the property pass in and negotiate afterwards.
But one thing you need to know is that the highest bidder’s right to exclusive post-auction negotiation is only a courtesy. The agent and vendor are able to negotiate with any interested party once the property has passed in. They will usually offer the highest bidder the first right of refusal, however, there may be other parties suddenly making offers. By leaving the negotiations until after the property has passed in, some vendors harden their stance and a good buying opportunity could have passed you by.
Go back to tip number 1 above: know the value of the property and what you are prepared to pay before you head to the auction. If you know that and you keep a cool head, the rest will follow.
Published:- April 2016
DISCLAIMER: 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.