It's a fact of property life that a lot of good real estate is sold via auction. It's also a fact of property life that not many people know how to bid at auction, let alone how to be successful!
In fact, the vast majority of bidders at an auction are nervous wrecks who end up going way above their limit because they just have to “win”. The problem is they often end up the loser anyway because they pay way over the odds for the property.
We have a number of strategies that we use to make sure that we have the best chance of being the successful bidder — but we never ever go above the agreed limit. Never.
You see the main problem with auctions is that people become emotional bidders due to their Fear Of Missing Out or FOMO. That's why auctions are such a sound selling technique in a buoyant market. The sense of competition that's created on the day by all the bidders being there physically and by the auctioneer saying such things as “It's against you sir or madam” means that the majority of people get carried away. Of course, that makes the vendor, the sales agent and the auctioneer very happy, but the “lucky” new owner has likely paid far too much.
Long before auction day we carry out our due diligence on the property, complete all the necessary inspections (which must be done before an auction so you may need to be willing to spend some money to be prepared, whether they are successful or not), and we also do thorough research on the agent and the auctioneer.
This is where relationships with agents are paramount so we can discover as much information as possible about the property, the vendor and their motivation for selling. This intel can help determine our auction strategy, including establishing what special conditions may be negotiated before the day, such as a longer settlement or a lease-back agreement, smaller deposit etc.
Studying the auctioneer is a valuable exercise because there are some good ones out there, but there are also some bad ones. The bad ones are quite mechanical in nature and can give their game away because they use the same tactics and style every time they call an auction. So, to learn their “tricks”, we will go to a few of their auctions beforehand where we might learn how they open and close the auction, how they interact with the crowd etc., and can therefore adjust our strategy to suit theirs.
It goes without saying that all bidders must have finance approved before an auction (not pre-approved) as well as understand the peculiarities of the auction legislation in the state or territory that the property is located. You must also know the specified deposit amount that will need to be paid on the day if you are successful.
One of the most significant skills, however, is to keep to your pre-determined price limit on auction day. Whatever price has been decided, you must not exceed that amount. No matter what. You also should never write your limit down on a piece of paper or the bidding card and have it in plain view of other bidders (like me!) on auction day for very obvious reasons. You would be surprised how often we see this.
Also, don't get pressured by agents who are attempting to siphon more money out of you during the auction. Just say, “I'm good” and they'll literally move on to their next target. A good strategy is to stand at the front, either left or right, so the auctioneer can see you and you can see the other bidders, too.
So, the secret to winning at auction is to be prepared and to understand that the devil is in the detail. You must know your limit, have your finance approved, complete all required due diligence, and not suffer from FOMO when it matters the most.
If you're worried about getting too emotional during an auction and going over your limit, then it makes sense (and will likely save you loads of money) to use a professional to act on your behalf and most of all, enjoy the experience.