Auctions are funny things. Many buyers and clients find them stressful and hard to read, mainly due to unfamiliarity. In reality, the beauty and advantage of an auction is it’s simplicity and transparency. Whoever is prepared to pay the most money on the day wins. What could be simpler? Still, some of the nuances are difficult for the uninitiated and that is what we will deal with here.
There are many theories about what to do at auctions. The most common one is to “go early, go hard” when upping an opponent’s bid. Another one is to use the “knockout bid” approach, which is to make a serious jump at the right time to confuse and intimidate the competition. I have seen these tactics work and I have also seen them fail epically.
As in most things in life, usually the best practice is to be yourself and respond appropriately in the moment to whatever is happening. However, there are some essential facts that can help settle anyone planning to attend an auction.
1. The auctioneer is able to make one bid called a “Vendor’s bid”. This is often used when the auctioneer wants to get the bidding started or take the bidding to the “Reserve Price”. In the past, agents would often plant “dummy bidders” in the audience to pump up the interest. That has now been outlawed. The Vendors Bid must be publicly declared.
2. The auctioneer must announce when the property has reached the “Reserve Price”. When the Reserve Price is reached the property is officially “On the Market” and will be sold. If it does not reach “the Reserve” then the property is “Passed In” and underbidders are allowed to negotiate outside of auction conditions.
3. Bidding under auction conditions means you need to be financially approved. The are no “Subject to Finance” conditions. Make sure you are fully prepped and researched before turning up to bid. You need to come with a ten percent deposit and be ready to go.
Many bidders like to hold back and sit on their hands until the reserve price is met. That is why there is often an uncomfortable period where everyone is waiting for someone else to make the first move. This is understandable since if the reserve price is not met, then the vendor will have to take a lesser price. There are pros and cons to this strategy. Yes, you may get to make an under-bid but this is not under auction conditions and the agents and auctioneers are able to take back control of the negotiation process.
Auctions can be stressful but at least all the cards are out on the table where everyone can see them. A tactic that the auctioneers and agents often use is to promote the fallacy that whomever is the highest bidder when the property is passed in gets sole right to negotiate with the vendor. This is not true. Anyone who has registered still has the right to bid after it is passed in. However, whoever has the highest amount when passed in gets to negotiate first.
This situation is often tricky for the uninitiated. If you are highest bidder when passed in, the agents will try to usher you in to a private room. It is often best to stay outside and in full view of everything. You could be intimidated into thinking that there are heaps of competitors outside ready to counter bid. If you can see that everyone has gone home then you can’t be fooled.
Why it’s a good idea to use a buyer’s agent at an auction.
Attending an auction is already an expensive and time demanding exercise. Why go to more expense if you may not even get the property? Here’s why:
1. A buyer’s agent remains unemotional.
2. You go into an auction fully prepared, researched and with a plan.
3. During an auction, listing agents often jockey and jostle a buyer. With a BA at your side it is a subtle sign that says, “Back off”.
4. A BA is able to ask the right questions and get the right info so what happens at an auction is predictable and understandable.
If you are attending an auction anywhere in the Northern Rivers area, Byron Property Search can research the property and attend the auction for $750 plus GST.
Otherwise, good luck and happy bidding.