How to take charge at auctions
Even if you’ve only ever been in a fierce bidding war on eBay, you’ll know how quickly your emotions can take hold of you. And that’s just for a designer dress, kids toy set or something useless you’ve stumbled upon after one or two many tipples.
So, when it comes a much more sizeable purchase, like your home, you better believe you’ll need to keep those emotions in check from the get-go. If you’ve never bid at auction here’s how you can win at auction in 3 steps.
- Be well-prepared
Whether you subscribe to the 5,6 or 7 Ps, you know that preparation prevents you from getting into all kinds of mischief. When it comes to auction bidding, your first bit of prep involves getting a firm figure for your borrowing capacity. It’s a very good idea to get your loan pre-approved at this point too.
This may sound like a simple task, but be prepared for it to take longer than you expect. As this process is administrative, you need to jump through many hoops before the paperwork even gets in front of your loan assessor. The assessor may have a backlog of other loans to be approved too, so they won’t have your dream home purchase front of mind (sad, but true!)
With your pre-approval checked off the list, the next task is to do your research on the value of the property you’re interested in. You can do this at a basic level by looking into data provided by CoreLogic. Here you can see recent sales in the area. You can talk to the sales agent too, but of course, they are going to have the sellers’ interest at heart.
Another option is to have an independent valuer look at the property. Just make sure they have expert knowledge of the local market. There can be misleading information from personal circumstances that may result in the property being valued far lower than its actual value.
By far the best option is to engage the expertise of a Buyer’s Agent / Advocate who can provide you with an accurate valuation of the property in the current market. Property values are dynamic and, in the fast-paced markets like Sydney and Melbourne, they can adjust every week. Having a professional who can provide you with accurate current data really puts you in poll position to win at auction.
- Position yourself for success
Before you go to the auction, make sure you’re very clear (with yourself) that you absolutely want the property. Why would you be going to the auction otherwise? If you have asked yourself the question “do I really want this house?” and answered with a definite yes, you need to arrive determined to win.
It sounds pretty basic, but you’d be surprised by how many people show up to auctions unsure about whether they really want the home. This affects your confidence when bidding and may result in you not bidding at all. Go in strong from the beginning – not financially, but mentally.
On the finance note, it’s important that you set yourself up for success with not one, but two budgets. Budget one is how much you are willing to spend – the ideal amount. Budget 2 is the absolute maximum amount you can afford. Any more than this and you may end up with buyer’s remorse. And that’s a whole lot worse on a home compared to a pair of uncomfortable designer shoes.
It’s also worth remembering that properties are often sold at auction when the market is hot, which means the expectations of the seller and agent are high. In booming markets, agents play off the emotion of the auction to get a higher price. Of course, there are personal circumstances that result in going to auction. With a bit of digging, you may be able to find out whether the seller is motivated.
When it’s game time, this is where you really need to use your understanding of human psychology to your advantage. Generally speaking, you want all other bidders to think that your pockets are bottomless. How? There are a few tricks. Firstly, don’t be the first bidder. Enter the auction in the second half or once the bidding calms down.
For example, if you start to see the other active bidders showing some hesitation or if their bids go from $30K increments down to $10K / $5K increments, this may mean the other buyers are approaching their ‘ideal limit’.
Secondly, you can break the tempo – or set your own pace. When you bid, don’t go at the same pace as the other bidders. For example, they add $5K, you add $5K, they add $5K and so on in a kind of never-ending ‘see-saw’ effect.
Instead, set your own pace by bidding at 2-3 times their price, and without the slightest hesitation. If they bid $5K, you bid $10 or $15K. If someone tries to drag you back to the $5K ‘see-saw’, raise their price by $15K again, or this time, perhaps even $20K. You control the game, don’t be a sheep.
You could be close to your budget, but the other buyers have no idea. They’ll think your pockets are deep and will give up.
Finally, forget about your ego. While you may want to win and need to be a bold bidder, make sure you stay calm and rational. If you get caught up in the bidding war, you may find yourself going well over your max budget. Then, only your ego wins…temporarily, before the crashing reality sets in. It’s a good idea to go with a partner or friend to keep you in check. Someone that will help you walk away – there’ll be other homes.
Alternatively, if you are the only bidder, and you haven’t met the seller’s reserve, and they ask for a little more that’s still within your budget – don’t say no, simply because you want to feel good about getting a bargain. If you have your budget in place, you’ve done your research and you know you want the property, then be prepared to do what it takes within that budget to secure it.
All too hard?
That’s what I’m here for! I’ve got an excellent rate for winning at auctions – well above 90%. With a background in psychology, it’s kind of my forte. I take great joy in helping clients win and I’m happy for you to be part of the excitement on auction day.