In this week’s Bush Bite LIVE I continue my special series on finding success buying property at auctions and this week I zone in on the psychology of bidding.
Transcript:
Hi and welcome.
Now, as you’re no doubt aware, the property market across the country is currently going gangbusters as a FOMO frenzy continues to drive property prices to record levels. This has resulted in a high proportion of properties being sold at auction, a form of sale that’s designed to put ultimate pressure on you as a buyer. So in order to equip you with the knowledge and skills to improve your chances of buying a property under auction conditions, this week we continue our special auction series that brings together and draws on a collection of advice from a wide range of industry leaders, buyer specialists and auctioneers, along with my own experience that I’ve gleaned over the last 35 years.
So to summarise where you’re at so far in the auction preparation process from our previous auction Bush Bites, you’ve attended lots of auctions for similar properties, especially with the auctioneer that’s going to be selling the property that 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. You’ve also organised a full finance pre-approval with a comfortable buffer. You’ve also completed a professional independent building and pest inspection, and you 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 confident success mindset. You go in expecting the unexpected. You understand the auction process and all the jargon fully. You’ve arrived and registered early. You’re keeping calm at all times. And if you’re really smart, even gauge a professional buyer’s agent to represent you to eliminate the biggest risk to you buying the property. And that’s you and your emotions.
And you’re also prepared to avoid the seven deadly sins of auctions. 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 you’ve left your competitive ego in the car to adopt the right auction strategy. You’ve got a handle on whether the auction pressure is on the buyers due to higher 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 approach to suit the circumstances. To assist with this, you’ve arrived an hour early. You’ve sized up your competition and you’ve chosen the best prominent vantage point up the front close to the centre stage, that is just to the side of the auctioneer so you can banter with them and establish your confidence while also reading the play and watching your competitions body language while you remain detached. You’re also mindful of your own body language, which needs to exude quiet confidence, and you’re paying close attention to the body language of the auctioneer and the other bidders looking for signs of nervous glances and whispered chatter that indicates that your competition is at or near the bidding limit so that you can then consider delivering a quick, confident knockout in a bid to crush their hopes. Now, this pre-bidding preparation combination will ensure that you’re fully prepared and calm, comfortable and confident on auction day. As auction performance is all about feeling and projecting confidence with sufficient preparation and the right positioning, your next step is employing the right psychology when it comes to bidding.
The key is to make all the other potential buyers believe that your pockets of bottomless to try and scare them off. Remember that auctions are designed to put the seller and the auctioneer in the strong control position while minimising the bargaining power of you and other buyers. So how can you rescue back some level of control while convincing other buyers that you’re constantly there to win the property come what may? Well, unfortunately there’s no magic bullet or one size fits all psychological approach to this, as every auction operates under different dynamics. So let’s run through a number of strategic approaches so that you can choose and adapt the ones that appears to fit your style and the auction conditions best on the day. The key here is that you need to place your bids deliberately and strategically and not only have the auctioneer to dictate the terms or build competitive momentum. So you need to develop a strategy for how you’re going to place your bids. Again, the focus is all around you feeling confident and demonstrating quiet confidence to all and sundry on the day. And confidence is all about control, both real and perceived control. Remember, it’s about controlling the bidding. Now at an auction, you’ve got two types of adversaries. There are the other bidders and the auctioneer. The auctioneer wants to run the bidding up as fast as possible, hoping to take big rises in using their bag of tricks, their jokes and their one liners to maintain the bidding momentum. So to rescue back some level of control, you can demonstrate this in a combination of five key ways control of consistency, control of timing and when to place bids, control of the tempo and the speed of your bids, control of your bid-size increments and control of your counter bidding.
So let’s break these down to discuss them a little bit more detail. Let’s start with control of consistency. In simple terms, you need to be consistent. Nothing shows intent to win like consistency throughout the bidding. You can help to beat immediately after opponent to show them that you’re serious. If they feel like you won’t give up, you increase your chances of winning. But remember to stick with your limits. Next comes control of your timing and when to bid. And the most important thing to remember here is that is that inactivity is not a strategy. If you don’t bid, you’re not going to win. And according to Justin Nickerson, who’s conducted nearly 7000 auctions, bidding actually increases your confidence and puts pressure on rivals that can become overwhelming for them. Often, those who think they can swoop in at the end succumb to the pressure that just builds and builds, and they walk away, having done nothing with the bidding pedal still stuck in their pocket. So if you give the impression that you’ve got money and lots more money left, your competitors will sometimes just give in and give up. There are three main phases where you can control the timing of your bidding. Depending on the dynamics of the day, you can bid first and early. You can bid midsection once the auction is announced that the reserve’s been reached in the properties in the market, or you can bid light and last. Now let’s dig into these three bidding phases. In some circumstances, it’s a good strategy to lob in early with hefty bids and attempt to intimidate the competition, which may be a high risk approach for inexperienced buyers, but can work well if delivered confidently and calmly.
If you go big early, your conference may pay off, but you need to be mindful that you may just push up the competition and the value of the property. So be careful when you use this approach in other terms. Avoid bidding unless the property has met the reserve. It may be better to wait until later in the auction after the auctioneer declares that the property has reached the reserve price, which is the minimum amount of the sellers going to accept. And it’s actually on the market before placing your first bid so that you can actually gauge the competition. In the past, less skilled auctioneers would call the property on the market as soon as it hit the reserve. Today, however, skilled auctioneers won’t immediately advise the crowd when the auction’s been met. So as a good, confident bidder, you should have no qualms about asking the auctioneer if the property is on the market. Yet you may or may not get an answer to that question. But it’s worth asking and continuing to ask during the auction. The third option is to bid late and last. The strategy here is to hold off making your first bid until the final calls begin when the auctioneer starts, the old going once, going twice routine and then come out with guns blazing with a series of short, sharp, confident bids to blow away the flagging competition. Whatever your starting strategy, your goal at auction must always focus on being the last one standing to either be the winning bidder or have the first right to negotiate if a property is actually passed in, because if the property is going to pass into the highest bidder, you want to make sure that that person is you. Now the next key element is to control the speed or the tempo of the auction.
Momentum plays a big role in determining the outcome of an auction. Generally, the faster the bidding, the more likely bidders are to get swept up in the emotions of the occasion and feel pressured into placing higher bids. So wherever possible, slow down and or mix up the speed and tempo of bidding to better control the auction to ensure that your bidding last as long as possible and other times you need to be quickly. Bidding quickly puts pressure back on the other bidders and creates the illusion that your budgets are limited. It makes it seem like you’ve got no concern as to whether things are going to stop and remember that it doesn’t have to be a huge jump in bid price each time. But making a quick decision leaves other buyers feeling like they’re under siege. But if you want to buy the property for less, it can help you if you slow the bidding down and do your best to take some control of the auction. One of the best ways to do this is to change up and down the amount of your bid rises. You’re bound to get some objections from the auctioneer, but that’s just part of the game. If the auctioneer refuses your bid, then they’ll need to get someone else to bid. But if there’s only one bidder, which is when this tactic actually works best, what can they do if you sit on your bid? Eventually, the auctioneer will either accept your bid, convince another buyer to give them what they want or they can make a vendor bid. Now, a lot of the time and especially early in the going and auctioneer will try to advance the bidding by $50000 or even $100000 or more at a time. The trick here? Don’t let them. You can control the flow of the auction by bidding in increments of $20000, $10000 or even $5000. When an auction goes down to the wire, you can even have bids moving up by only a few hundred dollars at a time. After all, you’re the one who knows your limit. Again, slow down and control the auction to see how long you can last. The next strategy to control the auction and set the pace is through your bid size increments.
Now data from auction streaming service Gavel has revealed that the average increment between bids at auctions is just over $10 000, and the most common knockout bid is a $10 000 bid. So the first step here in controlling your bid size increments is to avoid round numbers, according to leading auctioneer Damon Cooley. If you’re able to change the pace of the auction by bidding in odd increments, it keeps your competition guessing, and it makes it more difficult for the auctioneer to add the numbers up, which actually slows down the pace. Remember that auctions thrive on momentum, so controlling the pace of bidding is the key to keeping the price line. If you want to control the increments, the first bid you make can be under a round number. For example, don’t stop the bidding at $500 000, start at $495 000. Bidding will then be more likely to continue in increments of 5000 rather than 10000. In contrast, bidding big can be important at the business end of the auction. Let’s say your limit $750 000 and the bids at $740 000, and they’ve been going up in increments of $5 000, then finish strong and go straight to $750 000. This shows confidence, and at least you get the chance to put the bid in at your maximum amount.
Conversely, starting with lower increments can slow the auction and encourage more people to bid. So the larger the increment rise, the more likely it’s going to scare away competition. This means bidding in odd numbers, which can help to throw your competition off course a little. Most people will start round numbers as a budget, and so will perhaps stop at, say, $700 000. But if you can bid to $703 000 for that little extra, it may be the difference in winning. Now, in a similar fashion, bidding in odd increments like $8 000 instalments rather than the $5 000 may slow the momentum of the auction, as the auctioneer may need to take a moment to add up the numbers. For example, the auctioneer is asking you for a $10 000 bid. You might give them a $13 000 bid by bidding a few curling numbers. You’ll be surprised by how many auctioneers will actually struggle to add them up, which will help to slow down the bidding, particularly when you’re nearing your walk away limit. So modulating the pace of an auction by requesting varying smaller, larger and odd bidding increments, which is perfectly legal and then quickly cantering higher offers can help you to actually remain in the driver’s seat. In this way, by breaking up the tempo, you can set your own pace. So when you bid, don’t go at the same pace of the other bidders, for example. Generally, they add $5 000, then you add $5 000, they add $5 000 and so on in a kind of never ending seesaw effect. So if your budget’s a million dollars, why start $500 000 and work your way up so slowly? Instead, consider starting by setting your own pace by bidding at two to three times the price without the slightest hesitation.
If they bid five thousand, you bid $10 000 or maybe even $15 000. If someone tries to drag you back to the $5 000 seesaw, raise their price by $15 000 again, or this time, perhaps even 20 grand, you might even be really close to your maximum budget. But the other buyers have no idea that this is the case. They may feel like your pockets go way deeper than theirs, and they might just give out in other circumstances. Big bidding increments may not actually benefit you. For example, you may choose to bid only in $1 000 increments once the property has been announced that it’s on the market. The other bidders can jump all over the place with $5 000 $10 000 rises. You can meet them with more $1 000 bids until you actually wear them down.
The final area of confidence control revolves around your counter bidding. The key here is that when you counter bid, do it quickly and confidently. Bidding quickly after another bid’s received lets other bidders know that you are serious and will also help you to identify who your competition is. And it’s also going to help you to identify and prevent you from falling behind your other competitors.
So that completes our discussion on employing the right psychology and bidding strategies in our next instalment of our auction winning series, we’re actually going to unpack specific bidding tactics options.
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