Top 5 Auction Mistakes (And How to Actually Win)
In This Week’s How's The Market | Edition 112
Top 5 Auction Mistakes (And How to Actually Win)
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Top 5 Auction Mistakes (And How to Actually Win)
I’ve participated in a lot of auctions and bought many under the hammer as well via pass in negotiations.
Not to mention I would have spectated hundreds of auctions over the years.
I’ve developed an auction strategy that I use on behalf of my clients and have seen some good, great and terrible auction performances from a lot of others out there.
So I want to share all and give you my top 5 auctions tips to help you so that you can actually win at auction.
Set a walk away number the night before and for the love of god, please don’t make it a round number.
The amount of times I see an auction finish at exactly $1.2m or $1.5m is insane.
Most people that are looking for a certain property size/type like a 2 bed, 1 bath house across 1 or 2 suburbs in a similar condition will have a very similar budget.
Ask yourself the night before, if you and one other party were going back and forth in bids of $1k, factoring in the emotions of the day, what number are you prepared to miss out on the property for, assuming that it sells for $1k more than what you have?
If you’ve spoken with a broker and they said your limit is up to $1.2m, ask them if you can go to $1,207,000 if you tip in a bit more of extra money. That extra few thousand dollars may save you months more of searching.
Don’t bring friends or family to the auction and if you’re bidding stand alone.
I think this is actually one of the biggest mistakes I’ve seen out there.
A few months ago I was bidding at auction for some clients that were in the car around the corner - they were too nervous to be there and this actually provided more strength to our position as I was just a random guy in a suit by himself on the phone.
I was bidding against a young buyer couple standing next to their best friends, mum and dad and even an uncle or two that wanted to come and check the property out.
The property was put on the market in the middle of the range and just before it was sold and I knew the other party was out I made a $1k bid, then quickly made $1k bids each time the other party made an offer.
We didn’t have an unlimited budget and were close to our walk away number.
What happened next actually made me feel sorry for the couple I was bidding against.
After about 10 or 12 bids back and fourth at $1k that stretched out over 5 or so minutes - as it took the couple I was bidding against close to 2 minutes per $1k bid as they were so nervous and clearly hadn’t discussed an actual walk away number - their mum stepped in and said across the auction:
“Stop this, this is ridiculous, don’t spend any more”
I can nearly guarantee that she had done no comparable research of what the property was worth and that her emotions just overwhelmed her.
Once she did this, the couple stopped bidding and they lost the auction.
My clients were just as nervous, but strategically, they weren’t close by.
Don’t let the auctioneer create momentum.
This is for a few reasons.
You don’t want other bidders to get their confidence and start making $10k bids from the bottom of the range.
When there is no momentum it can make the auctioneer's job a lot harder, make the whole experience awkward for other buyers and increase the chance that others don’t bid and that the property passes on to you.
Here’s an example of how to do this.
If the property is quoted $1.8m - $1.98m, but you’ve done your research and believe the property is worth $2.15m, don’t start bidding at $1.8m
If you do this, the auctioneer will likely call for $50k bids as their reserve may be $2.1m and they know they will need to get up to sell the property.
This gives multiple other parties the chance to throw their hands up, get confidence and get into the race.
If someone else bid at $1.8m, I’d likely respond with $2m if I knew there was competition there and we were way off from the reserve price.
If someone else responded quickly, I’d slow the pace down to make it harder and more awkward for the auctioneer.
Know your competition prior to the auction.
I like to go to the Thursday open before an auction to chat with the agent.
Usually, I’ll get confirmation on settlement preferences and how they take deposits on the day to show them I’m very serious - then ask them how many building and pest inspections they’ve had, how many parties they think are guaranteed to bid on the day, if they’ve got any parties that are maybes and not confirmed if all other parties can settle with the vendors preference, has anyone tried to make an offer prior to auction, are there any parties that are not unconditional and wish to make an offer if the property passes in.
All of these questions will help give you a good understanding of your expected competition for the day.
Have at least one favourable comparable memorised in case the property passes in.
This is a pro tip!If you know competition isn’t strong and there is even a small chance the property could pass in, make sure you have some recent sales ready to go so that if the property does pass in to you and you’re negotiating directly with the agent, you have some ammo ready to go to help you get the best price.
Usually, what happens here is the agent will go to you with their reserve, which may have been moved since the property passed in, then you will give a counter offer or not and see if you can negotiate them down.
In this process, the agent will be walking away from you and into a room with the vendor to pass on your offer and feedback.
Agents ultimately want to sell the property or else they don’t get paid, so I like to give them logical ammunition that they can pass on to the vendor to help convince them to sell.
This is always best when it’s in the form of a comparable sale.
Bonus tip - if you are interested in a home going to auction and you don’t understand the process, go to auctions every week leading up to when you’re bidding to get an understanding for what happens when.
What The Agents Are Saying
Stock is here and deals are getting done.
There has been less stock come online than anticipated this past week, however, it has still been a huge uptick from what was available over the last month.
Agents have been trying to move on stock more quickly now that more is coming up.
Last week alone we transacted on two off market properties with both agents wanting to get the deal wrapped up quickly.
The Wow Factor!
53-57 Park Street, South Yarra, Vic 3141
One of Melbourne's best.
On an incredible street of South Yarra with an insane facade, renovation and floor plan.
This property has separate ensuites and walk in robes upstairs!
Price Guide: $31,000,000 - $33,000,000
In The Media
Inside $18m Toorak mansion with infinity pool, wine cellar, rooftop kitchen and bar
“We’ve had more than 100 groups through already,”
I doubt they’re all buyers, as a lot of people are interested in walking through this calibre of home.
Especially neighbours and property people like me.
Though there is no doubt that there is a huge amount of people in Melbourne with budgets over $10m.
Final Thoughts
If you’re in the market and planning on bidding at auction.
Save this article and take notes as these are some tips and more importantly mistakes you can avoid that will help you to increase your chances of securing your dream home.
If you or someone you know would like assistance to buy this year, book in a call and we can discuss if we can help.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.
