“Should I bid now?” Five mistakes first-time bidders make
There are those who paint the picture of perfect poise and nothing appears to throw their stoic, unfazed façade.
In truth thought, I’ve rarely met a soul whose first attempt to bid at auction didn’t come with sweaty palms, a furrowed brow and the heady mix of confusion, excitement and concern.
Bidding at auction can actually be enjoyable… by about your tenth event!
For this reason, first-time bidders make mistakes that will wrong foot their strategy and may result in missing out on what should have been an exciting first buy.
With confidence as your mantra, here are five rookie auction errors and how to fix them.
1 – Failing to prepare
The heat of competition can do strange things to reasonable humans. If you’re one of the final bidders near the end of an auction, you’ll feel an adrenaline rush and quickened heart rate coupled with an internal monologue that’s screaming “What do I do now?!”
This is not the time to make decisions about your absolute upper price limit.
Well before the auctioneer calls everyone together, smart buyers know where they are going to pull up stumps – absolutely, positively and without regret.
Do your sums well in advance.
Know what you can afford to borrow and what the property is worth.
No later than a day before the auction, you (and any significant other) must have a well-reasoned discussion about what you’re prepared to pay.
Take your time and, if this is absolutely the home for you, find your “pain point” – it’s that figure where literally a dollar more is a dollar too much.
Also get comfortable with the scenario that you might be outbid – and that’s OK. There will be other properties in your future and it’s all a learning experience.
Tackle these tough questions now so you can rely on your mental-muscle memory when the time is ripe.
2 - Not knowing the rules
Be well versed in your state or territory’s rules relating to auctions.
For example, arriving late on the day and raising your hand to bid as you close the car door is not on. Bidders must register in many states, including New South Wales, and that includes producing identification and other details.
As proceedings approach fever pitch, under-educated bidders can become more bewildered by unfolding events.
How will you know when the property has reached reserve and is “on the market”?
Take some time to learn about what happens if the property passes in. Did you know in many jurisdictions, the under bidder doesn’t not automatically have the first right of refusal?
As well as knowing the legislative rules of auction, be aware of the seller’s specific requirements too. What do they expect in terms of a deposit? Is an extended settlement period required?
The best advice here is two-fold.
Firstly, attend plenty of auctions before you bid so you can see how different scenarios play out.
Secondly, talk to agents and the auctioneers, particularly those selling your desired property. They will happily answer questions and give direction well before the auction.
3 - Standing back
When the moment arrives it’s best to be front and centre and make yourself heard. You must ensure the auctioneer knows you’re a real contender in the sale and you’re there to win!
There are also some who believe the best strategy is to hang back and make a “knockout bid” towards the end, but this can be a dangerous for novice bidders.
It gives other bidders a chance to build their confidence during proceedings and your “knockout” might actually be a vast overpayment for the holding.
Also, think about whether you want to open the bidding. If so, what will you offer? Most sellers expect a first offer below reserve, but come in too low and you might be greeted by a withering comment from the auctioneer that will zap your confidence.
Just like knowing where you’ll stop, have a think about when you’ll likely enter the fray too.
4 – Believing the auctioneer holds all the cards
The fact it’s the auctioneer and selling agent who are most under pressure at an auction may surprise first-time bidders.
The auctioneer is trying to get the highest possible price for the vendor, and that means they’re actually beholding to the bidders at the auction.
If agents "rush" you for quick decisions or push for a fast counter bid, take a moment to think. If they believe you’re a chance to up the ante, they’ll wait for your verdict.
This is also the time to employ your well-practiced poker face. Give nothing away if you’re stressed. Relax and let them feel the pressure.
While you should be respectful of the process, telling an agent you’d like a moment to gather your thoughts is fair enough too.
I’ve even seen bidders actually walk out of the room to make a phone call, with agents in hot pursuit. An interesting moment to witness – not that I’d advise it a smart strategy in most cases.
That said, run your own race not the auctioneers.
5 – Unquestionable compliance on increments
Just because an auctioneer requests an increase in bidding increment doesn’t mean you have to comply.
Auctions can come down to miniscule margins. I’ve seen events run at $100 bids – it’s excruciating for the crowd but could mean savings in the thousand for the eventual buyer.
Auctioneers will try and dictate your bid margin – they may even knock back margins that are too low in the early stages of an auction – but they’ll always come back once bidder numbers start to thin.
In the same way, don’t get caught by the auctioneer’s suggestion of a “knockout” bid. There may certainly be times during proceedings where an increased bid margins conveys very deep pockets, but keep your enthusiasm in check too.
Everyone, especially your competition, has their limits and the best strategy is to be one step ahead come fall of the hammer.
Bidding at auction may seem daunting but experience brings confidence. We at Property Buyer are extraordinarily well placed to remove the stress by working through the process of preparing for an auction and bidding on your behalf!
Why not draw on our expertise so that your biggest worry on auction day is what brand of champagne to crack in celebration of a successful outcome.