By Victor Kumar
Auction clearance rates are strengthening across the country as consumer sentiment slowly improves.
The thing is, the majority of people who buy at auction will pay too much because of their competitive nature.
I’ve bid at hundreds of auctions during my career – for clients and for my own portfolio – and have learned many tricks of the trade along the way.
The first thing that I do is calculate the market price of the property early so that I better understand what the bank value is likely to be.
I also inspect it well ahead of time – at least one or two weeks before the auction.
One of the main reasons why I do this is so I can organise a building and pest report.
You see, a lot of bidders at auction don’t bother with these reports, which is fraught with danger.
At a recent auction that I went to for a client, no one else had completed a building and pest report on the property.
There were six bidders, but I was the only one who knew that there were two large termite nests underneath it and part of the roof was flapping in the breeze.
So, as an expert, I will order a building and pest report on the majority of properties, which can help to determine its market price.
The early bird
During the auction campaign, I also try to find out how many contracts have been given out to potential buyers.
On auction day, I also get there early – in fact, at the recent one, I arrived so early I helped the agent set up!
While I do this because I am always happy to help, I also use the opportunity to source more information from the agent.
Also, if it’s an auctioneer I’ve never met before, I ask the agent to introduce me to him or her.
That, in turn, provides a psychological advantage over the other bidders because we’re technically on a first name basis – even if only for less than an hour – during the auction.
That said, while I may not have been introduced to that auctioneer before, I will have attended one of their recent auctions to understand their methodology.
What I mean is that each auctioneer has a slightly different way of doing things, such as whether they accept low ball offers or small bids, which I can use to my advantage.
Arriving early also allows me to mingle with the other bidders, which often results in me seeing their price limits because they’ve written them on their hands or on the note pad on the phones.
You’d be surprised how many people do that!
One of the major mistakes that people make when bidding at auction is believing that there is a magical system that they can adopt to be the victor.
However, you don’t have to stand in a certain spot or bid in a particular way.
Although, I do recommend that you try to be the first bidder because it allows you to set the tone and the price of the auction.
For example, at that recent auction my opening bid was $340,000 when the price guide had been $500,000.
Clearly, that was well below expectations, so the auctioneer pushed back on price.
However, I knew about the property’s faults which I happily shared with the gathered crowd when questioned for a higher bid by the auctioneer.
Disclosing that information meant that I knocked out four of the bidders straight away and it was ethical because it was true.
As well as being the first bidder, I always make sure I bid confidently without being arrogant and always stick to my price limit like glue.
The property ended up being passed in at $420,000, well below its $500,000 expected sale price, and above the market price I had determined for it as well.
At the end of the day, auctions are just an accelerated negotiation, however, the best performers don’t get caught up in the emotion that is usually palpable on the day.
Plus, they ensure they have enough money up their sleeves between their last bid and their limit so they can make a final counter-offer.
And, crucially, if bidding gets above their limit, even by $1,000, they stop – every single time.