Top 3 Tips for Buying Property at Auction

I must admit, I‘m incredibly fortunate to enjoy the professional life that I do.  I get significant job satisfaction in my role as Director of Empower Wealth helping our clients achieve their financial goals through residential property investment – as was recently featured in the cover story of the March Money Magazine  “Earn $2,500 per week by building a property portfolio”. Apart from that, I’ve also just spent the last 12 weeks traveling around this amazing country of ours filming the second series of Foxtel’s high rating show; Location Location Location Australia where, as co-host of the show, I was invited to help ordinary Australians buy their dream home.

In both of these roles, it is inevitable that I will need to bid at auction to secure properties for clients.    With that being the case, it is important that I make sure I am continually fine tuning my skills and strategies so that I can best represent my clients on the day.  Here are my Top 3 Tips for you to consider the next time you go to auction to buy your next property:

1. Slow down the bidding – more often than not, the auctioneer will look to have the auction move in bids of $10,000 as they seek to get strong momentum for as long as they can to get the price up as high as they can… but my goal is to get the bidding to increments of $1,000 as quickly as possible to do the exact opposite!  However, experienced auctioneers won’t allow me to do this easily so I have to be more strategic in the way that I seek to slow the bids down.  My first move in this situation is to strongly offer $5,000 but the auctioneer is likely to say “thanks but no thanks” at this early stage so I will offer him $13,000 instead which he will gladly accept.  He will then instinctively go for $7,000 on the next bid to round back to the nearest $10,000.  Once he has done this either me or someone else will offer $7,000 and guess what, the bidding has been slowed down.  Importantly, the next one he likely seeks is a $3,000 bid as he again instinctively looks to round off to the nearest $10,000 again slowing the bidding down even further and before you know it the bids are at my preferred increment of $1,000.

2. Strong confident bidding – in my experience, you can quickly pick the inexperienced bidders at an auction.
As a result of nerves and emotions, they will generally have chills running through their veins and the resultant body language and lack of confident bidding lets me see them from a mile away.  One of my main weapons is strong confident bidding immediately after a competing bid is offered for two reasons; 1) to not let my competitor have the satisfaction of being in front at all; and 2) giving the very strong impression that I mean business – I’m here to buy and I have deep pockets.  Now the truth is I do have an upper limit, but given auctions are a bit of street theatre the art is in being better at bluffing than the next person.

3. Have an intimate knowledge with value not price – it goes without saying that my success with the previous two auction strategies relies heavily on me being fully prepared in terms of knowing what prices have been paid in the area for similar properties as well as what the likely price will be for the property so I can identify the value based on my own research, not simply using the agent’s price guide.  One little trick that works well for me on an auction property that I know has solid interest and is unlikely to sell prior to auction, is instead of initially engaging with the “listing” agent of the property, I rather deal with another agent from the same office who effectively becomes the “introducing” agent should I be successful in buying the property at auction.  In short, this means that he will receive part of the overall commission should I be the successful bidder as I am “his client”.  Why this is a strategic move is because if I’m not the successful buyer, then the “introducing agent” gets nothing.  So in his attempt to protect his income, I generally receive some first rate “intel” on the campaign – who I am bidding against, how many groups had come through during the 4 weeks prior, how many have requested a contract, how many building and pest inspections have been done as well as where the price expectations of the vendor “really’ are.  This clearly helps me better prepare my client for who they are likely to encounter at the auction (if any) and what limit we should realistically set in order to give us the best chance of securing the property to determine if we should proceed or walk away.

I find the experience of buying at auction to be a lot of fun and the tactics involved really do intrigue me.  However, there is a lot to consider when you’re bidding for a property at auction.  I guess it’s the same question you’d ask yourself all the time with other services you need to consider from time to time – would you cut your own hair or get a hairdresser to do it for you?  Would you prepare your own legal defence or get a solicitor to represent you?  The same applies to auctions – unless, you’re an experienced bidder, I’d strongly suggest that you get a professional to do it for you as you could save yourself thousands of dollars in the process not to mention the grey hairs you could avoid as a result of “passing” on the anxiety that comes with bidding!