How To Win At Auction

How to win at auction

As a buyer’s agent who focusses on the Sydney market, I try to avoid auctions whenever I can. Auctions are designed to play on human psychology and emotion to achieve the highest possible price for a property, which is often well beyond what a buyer was willing to pay.

However some outstanding buyer’s agents in certain markets think auctions can provide tremendous opportunities.

Have you ever heard a story from a friend about how they went to an auction and ended up paying more than they were willing to spend, then justify it by saying things like:

  • We were sick of missing out
  • We knew just a little more money and we could secure the property we really wanted
  • The money doesn’t matter because there is only one property like this and we wanted it
  • There was only one other bidder

It’s easy to become emotional through the auction process, especially if you’ve missed out on a number of occasions, or have become emotionally attached to the property.

Although this can drive prices up to unrealistic levels, it also means as an opposing bidder, you can play off these same emotions to secure, in some markets, a great deal.

Of course, before you go to auction, it’s extremely important that you have:

  • Inspections completed
  • Independent valuation
  • Finance approved
  • Read and understood the auction rules (can vary state to state)
  • An absolute maximum you are willing to pay without exception

Today though, I want to share two distinct auction strategies that can give you a buying edge, depending on the market and environment.

Zoran Solano from our Brisbane affiliate office loves going to auctions for some specific properties, as the market there can be radically different from say, Sydney’s east.

How to Win at Auction - "The auctioneer has a saying, "start it low and watch it go". As a buyer's agent, we want to hamper that momentum and we want to shut this thing down." - Zoran

1. Remember an auction is emotional.
Remove your emotion. Have a figure in mind and stick to it. Better still, get a buyer’s agent to bid on your behalf. They know exactly what they are doing and have zero chance of putting in a late emotional bid and overshooting your budget.

2. Keep in mind other bidders can be emotional.
Break their spirits with aggressive bidding early. A lot of times this will ensure they stick to their figure (or in some cases stop bidding earlier than they normally would), rather than bothering going up against someone who appears “aggressive” and “determined to buy”. Ignore others if they bid this way as well. Remember, an auction is ultimately just a game.

3. Don’t let an auction build momentum.
Don’t let multiple bidders in on the action. The hardest bid for an amateur is their first bid. Don’t give them the luxury of making it easy. Human psychology says that people who place at least one bid at an auction are more inclined to feel some attachment and thus will end up bidding more. It can also become an ego issue for some. If you don’t even allow others to place their first bid by seeming like you are the expert and staying in control of the auction, some people can subconsciously feel as though they are out of their depth and thus not bid at all.

4. Your goal is to finish the auction as quickly as possible.
Bid fast. Bid aggressively. Shut down immediately if the auction figure goes beyond yours. There will always be another property. Always appear relaxed and never show stress. This part can be extremely difficult if you are trying to bid for yourself.

Here’s an alternate strategy you might consider.

In a strong Sydney market, I tend to go in with a slightly different approach, however the underlying principal of being aggressive is still there.

How to Win at Auction - Don't feed the fire at all. Stay silent right to the very end and then come in with strong bids out of nowhere - show them that you've only just got started." - Zoran

1. This is the same step as Strategy 1.
Remember the auction can be emotional. Whatever happens, bid only to your specific number.

2. This is where the second strategy differs. Don’t fuel the fire of bidding.
Allow others to set the pace and don’t add any additional “excitement” or action to the process by placing bids yourself. Simply stand silent and disengaged until there is one person remaining and the auction has stalled.

3. Come in out of nowhere with strong bids.
Only once the auctioneer is well and truly in the going, going, gone phase (don’t fall for their early tricks), place a strong bid seemingly out of nowhere and then continue with strong bids (until you reach the valuation cap or hard budget limit). This has a strong psychological effect on people who are emotionally engaged, just as strategy 1 does.

Notice how both strategies involve strong bidding?

If you’ve ever been to an auction, the agents absolutely love it when people signal that they are out, only to come back in with another bid. All that does is drive the price up and increase the “buzz”.

If you appear as though you have a lot more money and have zero stress, it’s very difficult for an agent to talk someone else into another small bid. Again, human psychology tends to back down in the face of aggression rather than to meekly add a small bid in the hope the aggressor will just give up.

Auctions can be intense, but with the right preparation, you can navigate them successfully. Remember, you are not there to make friends. You are there to buy a property at or under your budget and within the property valuation.

Don’t go in alone if you’re unsure. I’d never even bid for myself at an auction. I would always have someone else bid with zero emotional attachment on my behalf.

Although we can help with the entire purchase process, if you are just after some auction strategy, or would like some help bidding on your behalf, then book a time to chat and I’d be happy to help you out.

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