Auctions unearth a range of emotions – joy, if you’re the successful bidder, disappointment, if you miss out, and plenty of anxiety and excitement to boot.
Of course, these emotions aren’t always your friend. Which is why it pays to keep them in check.
The best way to do this is by feeding the rational part of your brain, so that it’s strong enough to push back against any distracting emotions. Which is to say, you need to do your research – and that starts with either getting your head around how the auction process works or learning all the lingo that auctioneers use on the big day.
How does an auction work?
While there are rules about how an auction must be run, each auctioneer has a different way of doing things. The auctioneer’s goal is to encourage as many bidders as possible to compete, to achieve the highest possible price for the vendor. Here are some tips for making a winning bid:
1. Bid confidently
The number of bidders you’re up against determines whether you should come out of the gate with an aggressive bid that blows your competition out of the water or pull your punches until the auction nears its end. But whichever strategy you choose, you’ll need to bid confidently.
This shows your competition that you mean business, which will throw them off their game and help clear your path towards a successful bid. Don’t wait until towards the end to make your bid however, get in early and get the ball rolling.
2. Ask questions
The more informed you are at an auction, the easier it will be for you to beat your competition. Make sure to keep tabs on who is bidding and how much they have bid, and don’t be afraid to ask the auctioneer if the property is on the market.
This advice holds good for your pre-auction preparation, too. Ask the agent lots of questions so that you can find out why the vendor is selling, how much interest has been shown in the property and which type of buyer is interested in it. This information will help you prepare the most appropriate bidding strategy.
3. Stick to your limit
Before you arrive at the auction, make sure you know what your bidding limit is. This should be based on your personal financial circumstances. You should also seek pre-approval from your lender so that you know exactly how much money you have to play with. This is especially important when bidding at auction, as you aren’t entitled to a cooling-off period if you change your mind.
Once you’ve come up with a limit, write it down on a piece of paper and keep this in your pocket during the auction; having a physical reminder will help keep your emotions in check.
What is a vendor bid?
A vendor bid is a bid made by the auctioneer on behalf of the vendor. It’s not an actual bid to buy the property; rather, it’s a public statement that the seller is not happy with the amount of the last bid and is used to keep the bidding moving forward. The auctioneer must announce that they are making a vendor bid when doing so.
The auctioneer may also halt proceedings if the bidding dries up. When this happens, they’ll usually say that they are ‘going inside’ or ‘seeking advice or instructions’ from the seller. They use this time to discuss the progress of the bidding with the seller.
If the bidding has reached or is close to reaching the reserve price – defined as the figure at which the vendor has previously agreed they will sell – the auctioneer will talk to the seller to find out whether they are willing to sell at the highest bid. If they say yes, the auctioneer will publicly announce that the property is on the market. Following this announcement, bidding will continue, and the property will be sold to the highest bidder.
Don’t pass out if it passes in
The auctioneer will seek bids until they meet the seller’s reserve. But if the bidding fails to reach the seller’s target price, the property will likely be passed in. The highest bidder will then be offered the first right to negotiate with the seller, in an effort to achieve a sale.
If this is not you, again don't sweat, just approach the auctioneer after the auction and make it known that you are there to negotiate to buy the house.
Are you preparing to attend an auction and need a few pointers? Send me a message HERE, and I would love to be able to give you help and point you in the right direction.