Continuing my special live series on on how you can have success buying property at auctions, I give you insider knowledge from my own personal experience of over 35 years in the industry as well as that of other property experts.
Transcript:
Hi and welcome!
In the current seller’s market, with limited properties for sale being famously pursued by herds of hungry cashed up buyers, high majority properties are being sold at auction in order to achieve the highest price. So in order to equip you with the knowledge and the skills to improve your chances of buying a property under auction conditions, this week we continue our special auction winning series that brings together and draws on a collection of advice from industry leaders, buyers, specialists and auctioneers by Bryce Holdaway, Rich Harvey, Kate Bakos, Damien Cooley, Justin Nickerson, Lauren Stanley and others, along with my own experience gleaned over the last 35 years.
Well, it’s now auction day, so how do you make sure that you stand out from the crowd? In the run up to the big day and as discussed over the last couple of Bush Bites on an auction preparation, you’ve attended a lot of auctions for similar properties, especially with the auctioneer that’s going to be selling the property that you’re interested in. You have pre-set your dream price, your fair price and your walk away price limits while avoiding round or even numbers, and you’ve organised a full finance approval with a comfortable buffer. You’ve also completed a professional independent building and pest inspection, and your conveyancer has reviewed the property contract, and you’ve negotiated and agreed any condition variations in writing in advance. This pre-auction preparation combination will ensure that you’re fully prepared, calm, comfortable and confident on auction day. Auction performance is all about feeling and projecting confidence, and then on the day in the lead up to the bidding war, if adopted a confident success mindset, you expect the unexpected. You understand the auction process and jargon, you’ve registered early, you’re remaining calm at all times and you’ve engaged a professional buyer’s agent to represent you to eliminate your emotion as your biggest risk, and you prepared yourself to avoid the seven deadly sins of auction. You won’t talk to your partner during the bidding. You won’t phone a friend. You won’t let your body language give you away. You won’t bring the whole family along. You won’t overdress. You won’t be rude to the auctioneer. You won’t make silly bids and you won’t bid against yourself.
In addition, you won’t fall for the auctioneers traps, and you’ve made sure that you left your competitive ego in the car. I’m now going to give you a peek behind the curtain at some of the psychology and specific behaviours that you can adopt to make the difference between a wasted day and you owning a good property at a good price. The following auction approaches are taken from a chapter of the insider’s guide to saving tens of thousands at auction by Patrick Bright, now Bright says that they won’t guarantee you win every auction you attend, but having a thorough understanding of the auction process will certainly help to give you a better chance of winning well at auction. Here’s what he says. It’s important to start with the realisation that there are two types of auctions. Auctions where the pressures on the buyers due to buyer competition, which is certainly the case in the current hotly contested FOMO driven seller’s market. Then there are auctions where the pressures on the vendor due to insufficient competition above the reserve price. So to adopt the right auction strategy, you want to start by getting a handle on which category the auction you’re about to bid on actually falls into you. And remember that every auction is different. Attending many auctions over the years, I can assure you that no two auctions of the same.
Sure, you have a similar playing field. However, the players being the buyers, the referee and the lines people being namely and the auctioneer and the selling agents are all different every time. You have to adjust your approach to suit the circumstances. In this regard, some of the factors that can influence the auction dynamics include things like how motivated the vendor is to sell, what the selling agent has said to potential buyers, how much the property has been under quoted by the selling agent. The number of bidders and their price expectations. The location of the auction. Whether it be onsite in auction rooms or online. And external conditions, for example, a recent interest rate rise, recent media coverage of the property market, the time of year, etc.. Now with this backdrop, when bidding at auction, you need to rely on your experience and your intuition. You can only predict your competition to a point, but if you understand the game and human psychology well enough, you can gain the upper hand. You’ve got to read the environment, and decide what tactics are most suitable. Do you want to set the tone for the auction? Or do you want to sit back and watch and then come in at the last minute? If you’ve never bid at auction before, take consolation in the fact that other bidders are probably inexperienced as well. But unlike you, they may have not listened to this Bush Bite well, unless you’d hope they haven’t anyway. So the first step to gauge all of this is to arrive early on auction day. It’s a good idea to arrive early by at least 30 to 60 minutes, so you can expect the property for the last time. Registered bid and most importantly, get a sense of your competition.
You also need to arrive at the auction early to choose the best vantage point and as importantly, determine how many bidders are registered. For example, if there’s 20 odd bidders, you might decide to open with a strong bid to knock people out. Where an opening bid above the advertised price range can immediately shrink the bidding pool. You should also work out where you’ll stand the auction and stake your claim on your spot before anyone else does. Choose a place upfront and obvious just to one side where you can be seen clearly by the auctioneer when placing a bid and also where you can see who else is bidding. In this regard, you need to take centre stage or close to it. As buyer’s agent Rich Harvey says when he bids on behalf of someone, he likes to take pole position in the room or on site. Stand in somewhere that you can see the auctioneer, but also everybody you’re going to be competing against. Don’t stand in the back or in a corner where no one can see you show that you mean business. The more visible you are, the more commanding of the auction process you can be. Side positioning is critical. Remember to stand at the front just to the side of the auctioneer so they can clearly see you and you can see them, and you have clear vision of all the other bidders so you can read their body language. So, I reiterate that you need to be visible. Contrary to popular belief, hiding behind a column and popping the paddle out to bid isn’t going to win you auctions. Part of winning is confidence, so be visible in the centre and show your confidence to the auctioneer.
Next, you need to get your tongue wagging. When it comes to auctions, silence is deadly, not just for failing to bid when you should, but also engaging with the auctioneer. This follows on from standing in a prime position, so make sure you’re somewhere that you can banter with the auctioneer, telling jokes, engaging conversation, it shows you, you know the process and you get to have a bit of fun as you go along. Make yourself known. Speak clearly. And don’t be afraid to heckle the auctioneer in a nice, friendly way. Next, remember to stick to your limit. The first and most important auction tactic. well, it’s actually more like a rule, is to set a limit before the auction and never go over it. This is the only tactic that applies in all situations. I’ve seen buyer’s remorse after many auctions, a little while after the hammer’s fallen, the buyers thinking, damn, I’ve paid too much, I shouldn’t have done that. If you blow your limit your dream property could become your nightmare liability as you struggle to make mortgage repayments that are more than you’ve actually budgeted for and can afford. So set the limit after you’ve done some solid research and don’t go over it, ever. And. Lock in your worst stretch limit in advance, which is your absolute walk away maximum price and then aggressively bid to that point and no higher. Remember, it’s like someone sprinting headlong to the edge of a cliff. Next, control your emotions. You need to control your emotions and actions because emotions can actually cost you money. The number one option mistake you’ll pay with interest is getting carried away and paying too much for the property. That’s a mistake that you could end up regretting for a very long time.
But it can be hard to stop yourself blowing your limit when the home of your dreams is about to slip through your fingers. The trick is to stay a little detached. If you’re too attached to the property, it’s easy to get carried away. Try to remain philosophical. Remind yourself that you’re not likely to win every auction, and there’s always more than one property out there that’s going to meet your needs. And again, expect the unexpected because auction bids can jump very quickly or, as I keep saying, engage a professional buyer’s agent to do the bidding for you. Next, you need to watch body language. Once you’ve got your paddle in your hands, stand a position that allows you to keep an eye on the competition. According to renowned auctioneer Damien Cooley, non-verbal cues offer valuable glimpses into rival buyers behaviour. One of the biggest mistakes the buyers make is that they don’t watch their competition. If you’ve got a bidding sequence that’s going something like 800 000, 810 000, 820 000, and it slows down and a buyer tries to go 825 000 as they’ve got their mum and dad with them, and they’re all looking at each other and having a conversation, that’s a very good indicator that the buyer is close to reaching their limit, and they’re discussing with the family whether they’re out or whether they should go another 5 000 in the event that such a buyer comes back with a desperation bid of 5 000, Cooley recommends immediately placing a high bid, a signal of intent that he likens to a knockout block. So pay close attention to body language. Understanding how bidders behaviour auction can reveal when a buyer is actually reaching their limit.
Couples are guilty of some of the biggest mistakes, which can include having a discussion mid auction, making a phone call if the other partner isn’t present or even making eye contact with each other. So basing your maximum bid on due diligence rather than emotions, having confidence in your decision and being prepared to walk away are the keys to controlling these signs. If you go to the auction with conviction, it’ll show in your body language and your competitors can read it too. Cooley says that reading the body language of the competition allows buyers to know when to deliver that knockout bid. If they look at each other, that’s a sign that they’ve come to the auction with a preconceived number, and they’re either at that number or they’re very close to it. That’s the point where you, as a buyer should increase your increments. It might take that buyer 30 seconds or a minute to make the bid, and they’re hoping that you’re not going to bid again. If you’re able to crush their hopes immediately with a counter bid, it sends a message to them that they’re not going to buy the property, so buyers body language as they gather for an auction, offer reveals the players and the pretenders. You can tell who’s nervous, who’s aggressive or who’s ready to go.
So to summarise where you’re at so far in the auction process, you’ve attended lots of auctions for similar properties, especially with the auctioneer that’s going to be selling the property you’re interested in. You’ve pre-set your dream price, your fair price and your walk away price limits while avoiding round or even numbers, and you’ve organised a full finance pre-approval with a comfortable buffer. You’ve also completed a professional independent building and pest inspection, and your conveyancer has reviewed the property contract and you’ve negotiated and agreed any condition variations, in writing, in advance.
And then on the day in the lead up to the bidding war, you’ve adopted a confidence success mindset. You go in expecting the unexpected. You understand the auction process and jargon fully. You’ve arrived early and registered early. You’re remaining calm at all times. And if you’re smart, you’ve engaged a professional buyer’s agent to represent you to eliminate your emotion as your biggest risk. And you’ve prepared yourself to avoid the seven deadly sins of auctions that I’ve discussed previously to adopt the right auction strategy. You want to start by getting a handle on whether the auction pressure is on the buyers due to high competition, or whether the seller is under pressure, as the dynamics and power balance are different with every auction and you need to adjust your price to suit the circumstances to assist with this. You’ve arrived an hour early, you’ve sized up your competition and chosen the best prominent vantage point at the front, plus the centre stage, that’s just the side of the auctioneer, so you can banter with them and establish your confidence while also reading the play and watching your competition’s body language. Then remember to stick to your predefined walk away limit, and never go over and control your emotions at all times by staying detached. Also, be mindful of your own body language, which needs to exude quiet confidence and pay close attention to the body language of the auctioneer and the other bidders looking for signs of nervous glances and anxious chatter. It indicates your competition is at or near the bidding limit so that you can consider delivering a quick, confident knockout kind of bid to crush their hopes. This bidding preparation will ensure that you’re fully prepared, calm, comfortable and confident on the auction day because auction performance is all about feeling and projecting confidence.
In the next instalment of our auction winning series, we’ll start unpacking some very specific bidding tactic options, so keep an eye out for that one. That’s more food for thought!
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