Tips for buying at auction

Having been successful and satisfied with over twenty auctions, I stick to this basic rule.

Price – Set your limit based on math not emotion, stick to limit.

Strategy – in a busy auction, bid only after the reserve has been met and it’s below your limit and or if it’s a quiet auction wait until they place a vendor bid and then make the next bid as you want to be the one to make it to the negotiations if it doesn’t meet reserve.

In the current market getting something that feels like a bargain is difficult, unless you are very rehearsed in the market value. For example if you see a place going to auction with a 900k price guide you will find the reserve is probably $970k and realistically the sellers want over a million. So be comfortable accepting winning it at say $985k is a bargain, if you know what I mean, as opposed to expecting to get it for $905k.

I’m quite used to bid auctions and will speak from my experience. The first and foremost thing to take care of before you go for any auction – whether it is an online one or a traditional one is research.

1. Do your own research. You must take a look at the list of items up for auction in the auction catalogue and find out their market prices before you place a bid on them. Without knowing the actual prices, you will be just shooting in the dark.

2. Plan your Budget: Budget is a crucial factor in any auction. Doing a detailed research will help you in planning an effective budget. In order to prevent overspending, careful planning of the budget is very important because once you start overspending the chain will continue and you’ll end up spending a fortune.

3. Rely on your brains: Many a times we tend to follow our gut instincts. But this is the biggest mistake anyone can make in an auction. Taking prudent risks is a different thing but bidding on an item that you’re completely unaware of is foolish. You might get lucky sometimes but still staying away from such bets is more wise.

4. Be an aggressive bidder: When you’re in a bidding war, get aggressive. Increase your bid as soon as the other bidder bids. This will give an illusion that you’ll go a long way and the opponent might leave the bid even before the bid gets very high. However, you must know your maximum spending amount and be in control completely.
I hope these points will help you in your bid. You can also check out my website https://www.greendeltaauction.com/ where I regularly write tips about auctions. The detailed posts there might help you more in being a successful bidder.

Bidding at auction is easy.

Know your limit, be happy to pay that amount, and bid up to it. Then stop.

If it sells for under your limit, then be happy.

If it sells for over your limit, be happy you didnt pay too much.

You can do all sorts of tactics and mind games and what not, but all they are doing is trying to convince someone else not to bid because you will still outbid them. These are useful if they work – they wont work on someone adopting the approach above (who will bid up to their limit then stop), they only work on people who are above their limit but feel they need to keep going. So you can use them or not.

I dont get the thing about not being the first to bid. Bid low and if no one else is bidding then they have to negotiate with you.

Congratulating the winner sounds good, but the winner will probably look at you and think ‘if only you had stopped bidding $10,000 ago, it would have saved me $10,000’

Masquara said :

Really important to attend some auctions without bidding, so you will feel comfortable. Do not risk attending your first auction as a bidder.
When you are ready to attend an auction as a bidder, take someone with you that you have briefed about your limit, who you can trust to stop you if you’re going to join a frenzy. That person should be aware of your actual limit and the financial ramifications for you if you overbid. Brief yourself beforehand about the implications of paying more for, say, a house out in the burbs, when that higher amount could get you closer to the mark in a more central and transport/mortgage friendly area. Have your limit written tangibly on a piece of paper in your hands (but folded so no-one can see it!) or your pocket.
Keep right out of the bidding for as long as you can, so you don’t enter any juvenile “competitive bidding, can’t bear to lose” with another bidder.
When you bid, slow the bidding, but you must only apply this technique when you have a sense that the bidding is reaching a realistic amount. If the auctioneer has been jumping the bids up by $5,000, call out an amount that is ONE thousand dollars above the last bid. The auctioneer will not like it (it’s a professional bidder’s technique that I learnt by observation at auctions). That will slow the auction down, and you’ll also be able to gauge that you won’t win, if another bidder jumps in with another $5,000 and resumes the high bidding. That will flag that there’s an rookie bidder (lookin’ at you, Maya!) or someone so cashed up they don’t care, or they have another strong driver to buy that exact house (e.g. for a frail rello to move nearby, or they just have an outlier attachment to something about the house).
If the house passes in, don’t do what Maya did and pay only $10,000 below the reserve as the only negotiator. The hassle and auction fee of auctioning again, plus the cost of the delay, will mean they should sell for at least $15,000 less than the reserve and likely more.
If you lose against one other bidder, congratulate them afterwards and shake their hand. That will make you feel better about the loss, and also take any hubris out of their win (the psychology of auctions is pretty primal).

Great post, some very good advice here.

I add that you shouldn’t let yourself get rattled when real estate agents assisting with the auction start whispering to you to bid more as the bidding slows down. Look them in the eye, smile, and calmly but firmly tell them that everything is fine and you don’t need their assistance. The more in control you are the better the chance that others will stay calm also.

I also agree with congratulating the winner if you come second.

Masquara said :

Really important to attend some auctions without bidding, so you will feel comfortable. Do not risk attending your first auction as a bidder.
When you are ready to attend an auction as a bidder, take someone with you that you have briefed about your limit, who you can trust to stop you if you’re going to join a frenzy. That person should be aware of your actual limit and the financial ramifications for you if you overbid. Brief yourself beforehand about the implications of paying more for, say, a house out in the burbs, when that higher amount could get you closer to the mark in a more central and transport/mortgage friendly area. Have your limit written tangibly on a piece of paper in your hands (but folded so no-one can see it!) or your pocket.
Keep right out of the bidding for as long as you can, so you don’t enter any juvenile “competitive bidding, can’t bear to lose” with another bidder.
When you bid, slow the bidding, but you must only apply this technique when you have a sense that the bidding is reaching a realistic amount. If the auctioneer has been jumping the bids up by $5,000, call out an amount that is ONE thousand dollars above the last bid. The auctioneer will not like it (it’s a professional bidder’s technique that I learnt by observation at auctions). That will slow the auction down, and you’ll also be able to gauge that you won’t win, if another bidder jumps in with another $5,000 and resumes the high bidding. That will flag that there’s an rookie bidder (lookin’ at you, Maya!) or someone so cashed up they don’t care, or they have another strong driver to buy that exact house (e.g. for a frail rello to move nearby, or they just have an outlier attachment to something about the house).
If the house passes in, don’t do what Maya did and pay only $10,000 below the reserve as the only negotiator. The hassle and auction fee of auctioning again, plus the cost of the delay, will mean they should sell for at least $15,000 less than the reserve and likely more.
If you lose against one other bidder, congratulate them afterwards and shake their hand. That will make you feel better about the loss, and also take any hubris out of their win (the psychology of auctions is pretty primal).

Yes I was a rookie, as are most house buyers, but I got a good deal. The reserve was $130,000. I got it for $10,000 less, which was a discount of about 9%. These days for a similar house that would be a discount of about $54,000. The market was on a strong upswing, and I knew it was, as I had been following the sale of similar houses closely, and three months later an identical house close by sold for $145,000, and the market kept rising. If I had stepped back, not taken that house I would never have afforded to buy an investment house. The two earlier auctions I went to I held back until the other bidders had their say and then came in, which is what you suggested, but that method failed for me, so this time I decided to try bold. It didn’t matter in this case, as my bid was still way bellow the reserve.

Really important to attend some auctions without bidding, so you will feel comfortable. Do not risk attending your first auction as a bidder.
When you are ready to attend an auction as a bidder, take someone with you that you have briefed about your limit, who you can trust to stop you if you’re going to join a frenzy. That person should be aware of your actual limit and the financial ramifications for you if you overbid. Brief yourself beforehand about the implications of paying more for, say, a house out in the burbs, when that higher amount could get you closer to the mark in a more central and transport/mortgage friendly area. Have your limit written tangibly on a piece of paper in your hands (but folded so no-one can see it!) or your pocket.
Keep right out of the bidding for as long as you can, so you don’t enter any juvenile “competitive bidding, can’t bear to lose” with another bidder.
When you bid, slow the bidding, but you must only apply this technique when you have a sense that the bidding is reaching a realistic amount. If the auctioneer has been jumping the bids up by $5,000, call out an amount that is ONE thousand dollars above the last bid. The auctioneer will not like it (it’s a professional bidder’s technique that I learnt by observation at auctions). That will slow the auction down, and you’ll also be able to gauge that you won’t win, if another bidder jumps in with another $5,000 and resumes the high bidding. That will flag that there’s an rookie bidder (lookin’ at you, Maya!) or someone so cashed up they don’t care, or they have another strong driver to buy that exact house (e.g. for a frail rello to move nearby, or they just have an outlier attachment to something about the house).
If the house passes in, don’t do what Maya did and pay only $10,000 below the reserve as the only negotiator. The hassle and auction fee of auctioning again, plus the cost of the delay, will mean they should sell for at least $15,000 less than the reserve and likely more.
If you lose against one other bidder, congratulate them afterwards and shake their hand. That will make you feel better about the loss, and also take any hubris out of their win (the psychology of auctions is pretty primal).

Mc001 said :

Grail said :

What is being sold?

My general auction advice is this: don’t.

If you insist on ignoring that advice, don’t worry too much about dressing the part. Just turn up, ask the auctioneer or their staff about whether bidders are required to have a number stick, or what the auctioneer’s traditions are for signalling bids. Some auctioneer will call up the next bid in an effort to entice someone to acknowledge it. Other auctioneers will wait for people to call.

The most important part is to have the money, know your limits, and don’t get caught up trying to beat someone’s bid. Any time you find yourself thinking, “bugger! sniped again!” you know it’s time to stop bidding and calm down.

The second most important tip is to only bid on the things you actually want. This is second rather than first, because sometimes you might have the money to buy something you don’t want, but still be able to resell that thing for a profit.

Know the market. Know your limits. Have the money.

But my first piece of advice is: don’t do auctions. Don’t sell through auction. Don’t buy through auction.

And any time you buy something, stop looking at the market. You’ll end up finding the thing you bought for half the price somewhere else a week later.

Thanks for the advice. You would never buy a home on auction? Doesn’t that rule out many homes in Canberra?

Yes most. Unfortunately in Canberra you will need to bid at auction, unless you can make an acceptable offer before the auction. Good luck in your house hunting.

Grail said :

What is being sold?

My general auction advice is this: don’t.

If you insist on ignoring that advice, don’t worry too much about dressing the part. Just turn up, ask the auctioneer or their staff about whether bidders are required to have a number stick, or what the auctioneer’s traditions are for signalling bids. Some auctioneer will call up the next bid in an effort to entice someone to acknowledge it. Other auctioneers will wait for people to call.

The most important part is to have the money, know your limits, and don’t get caught up trying to beat someone’s bid. Any time you find yourself thinking, “bugger! sniped again!” you know it’s time to stop bidding and calm down.

The second most important tip is to only bid on the things you actually want. This is second rather than first, because sometimes you might have the money to buy something you don’t want, but still be able to resell that thing for a profit.

Know the market. Know your limits. Have the money.

But my first piece of advice is: don’t do auctions. Don’t sell through auction. Don’t buy through auction.

And any time you buy something, stop looking at the market. You’ll end up finding the thing you bought for half the price somewhere else a week later.

Thanks for the advice. You would never buy a home on auction? Doesn’t that rule out many homes in Canberra?

I should have added, if it’s not house auctions you are talking about, but furniture and the like, I have only bid twice, so have little to offer. I got a bargain with one, but only because I knew one of the auctioneer’s helpers and got some insight into what I was bidding for, and the other time I stopped bidding because the competition was too strong. A pretty object (very, sigh!) and the other bidders were bidding way over its worth.

I have gone to three house auctions to bid. The first house had problems with easements and I was only willing to bid low. When my price was passed I made no more bids. The second house had borers, so again I was only willing to bid low and stopped when the figure rose above cheap. If I had known then how bad borer (not white ant) infestation can be I might have not bid at all. The third house I bid for I was the only bidder, and I got a bargain. No easement or borer problems either. I didn’t know I was the only bidder, so when a (low) vendor bid was made I jumped straight in and made a jump of $5,000 to show I meant business. Then there were no more bids. I thought, what, no more bids and why was I so stupid to raise the price by $5,000? But it didn’t matter, as we were still more than $20,000 under the reserve. The house was passed in because it didn’t reach the reserve and the vendors began negotiating with me. They wanted me to pay the reserve, I told them it was too much they were asking and listed local, similar houses that had recently sold for less and asked why they thought this house was worth more. Finally the vendors dropped the price to $10,000 under the reserve and I excepted. In those days that was about 9% under the reserve. Three months late a similar house sold for 25% more. I was very lucky that auction and fluked a good bargain. My advice, know the prices of recent similar sales.