Auction Tips & Tricks for Buyers
Auctions can be an exciting but intimidating experience, particularly if it’s your first-time bidding.
To win an auction, it’s best to go in with a solid strategy, emotional control, finance approval and a clear understanding of how the whole process works. Today, we’ll share some top tips for bidding at an auction to help increase your chances of success. We’ll also explore some of the key language you may encounter on the day and also the opportunity of using a Buyers Agent / Advocate to assist you with the process.
How Do Auctions Work?
At an auction, potential buyers gather publicly to bid on a property. The auction is led by an ‘auctioneer’ who’s hired by the vendor or a real estate agent. To participate in the auction, you’ll first need to register with the auctioneer so you can receive a bidder’s number.
Once the auction begins, potential buyers will have the opportunity to bid against one another, with the property ultimately going to the highest bidder. If your bid is the highest when the hammer falls, you’ll need to sign a contract right then and there. You’ll also need to pay a deposit, so it’s important to be confident in your desire (and capacity) to pay for the property before the auction begins.
What is a Reserve Price?
A reserve price is the minimum dollar figure the owner is willing to accept as a winning bid. The owner usually doesn’t reveal this before the auction. If bidding reaches the reserve price, the property is considered ‘on the market’ and will be sold to the highest bidder.
If bidding doesn’t meet the reserve price, the highest underbidder has the first right to negotiate with the owner or the owner can withdraw the property from the market.
How to Bid at an Auction
While no two auctions are entirely the same, there are some strategies you can use to improve your chances of winning. Here are our top auction tips and tricks to help you bid with confidence.
1. Be Prepared, Set a Budget (and Stick to It!)
One of the biggest mistakes you can make is not setting a budget (or exceeding that budget in the heat of the moment). Auctions are exciting, and with the Vendors Agents usually in your ear urging you for one more bid to “not miss out”, it’s easy to get carried away, but it’s important to be realistic about how much you can afford.
You should also ensure you’re pre-approved for a home loan so you know exactly how much you can spend.
2. Do Your Research
Research is so important for many reasons. One of the major reasons is that there is no cooling off period for the contract of sale when purchasing at an Auction (unlike with a private sale). There is also no builders warranty (unlike with new properties), so it’s highly recommended that you undertake a building and pest inspection as part of the research process.
These days, property values and estimates are easily accessible online, so everyone at the auction should have a clear idea of how much the property is worth. Be sure to do your research prior to the auction, and also inspect similar properties in the area to get an idea of what they’re selling for.
On Auction day, make sure your first bid reflects the market value of the property. Making an unreasonably low bid not only undermines your credibility, the auctioneer may even choose to knock back your bid entirely.
3. Attend Other Auctions
The more familiar you become with the auction process, the less daunting it will seem. It’s best to sit in on a couple of auctions rather than having your first auction experience be one you intend to bid in.
This can help you familiarise yourself with the process, the language, and the different techniques bidders use to win an auction. It’s also an excellent opportunity to speak to real estate agents and auctioneers for valuable insight into auction best-practices.
4. Decide What Kind of Bidder You Want to Be
People use all sorts of techniques during an auction. While some like to lead the bidding, others like to hold back and assess their competition before making their first move. It’s best to determine your tactics before auction day.
There’s no real right or wrong here, only what works for you and your budget. The most important thing is that you go in with confidence.
5. Know Where to Stand
An auction is not the place for wallflowers. Try to stand front and centre so you can be seen and heard clearly.
Standing at the front can help demonstrate that you’re a serious contender while also allowing you to see things from the auctioneer’s perspective. This makes it easier to keep track of what’s going on and where bids are coming from.
6. Bid Confidently, Bid Right
Finally, it’s time to start bidding. There are a few factors involved in bidding confidently, so let’s break this down:
- Speak (or gesture) clearly and assertively.
- Bid with rounded figures rather than increasing by odd increments. A bid of $550,000, for example, is stronger than a bid of $549,500, which people will more readily beat. Increasing by small, odd increments may also be seen as a sign that you’re reaching the end of your budget.
- When placing a bid, say the number in full to avoid misunderstandings. If you wish to bid $610,000, say it, don’t just call out $10,000.
- Remember, you’re not confined to the increments the auctioneer is suggesting. You can always increase by smaller increments (within reason), or larger increments if you wish.
- Make a counter-bid quickly and confidently. Auctions are a mind game, so it’s important to show you’re a serious contender. This can help knock out less serious bidders while also helping pinpoint your real competition.
- And finally, sometimes a vendor bid is presented by the Auctioneer. This is allowed and is clearly identified by the Auctioneer. It is often used to start the bidding process, to move bidding along if the Auction has stalled or close to reserve, or to get the property onto the market.
What Does ‘Passed In’ at Auction Mean? What Happens Next?
If bids don’t meet the reserve price or are below the vendor’s expectations, the property can either be ‘passed in’ or withdrawn from auction. If passed in, the highest bidder will be given the first right to negotiate with the seller. That’s why it pays to be the last bidder even when the property is passed in.
Final Tips on How to Bid and Win at Auction
With careful preparation and a strong bidding strategy, your first experience at auction need not be so daunting. Remember to do your market research, set a clear budget, and familiarise yourself with the process before auction day. Choosing the right place to stand and bidding clearly and confidently can also help increase your chances of success.
This can be an intimidating process, but it can also be exhilarating and fun, so be sure to take a moment to appreciate the experience.
If you feel like the Auction process is too overwhelming, there is the option for you to engage a Buyers Agent / Advocate to manage this for you. They can either manage the research side of things and / or the bidding at the Auction for a fee.