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Should You Bid At Auction?

Should You Bid at Auction

I’ve been working in the property industry for over 20 years now and I’d have to say I think I’ve pretty much seen it all. From the early 1990’s recession we had to have through to the 2008 global financial crisis, its fall-out and beyond.

The current heated property market in Sydney and to some extent Melbourne is creating an auction frenzy unlike anything that’s been seen before and I’m sure will be talked about in historical anecdotes for years to come.

In the mean time though, if you are looking to buy a property in Sydney or Melbourne and it is listed for sale by auction, given that auction clearance rates are at record levels you will need to make sure you are well prepared and ready to bid on auction day if you are going to have any chance of securing it.

A case in point

My client’s often ask me about all the property war stories. In particular, they want to know what surprises me the most as an experienced Sydney buyers agent.

To be honest I’d have to say it’s probably the amount of people who register to bid at an auction but then don’t bid on the day.

No better example than a recent Bayview auction in Sydney’s north when I was bidding on behalf of a client who couldn’t be there on the day.

I arrived 30 minutes early, as I always do on auction day, so that I can take a good look through the property.

How to suss out your competition before the auction

I don’t really need to see the property again. As much as I am taking in the views and the layout one last time I’m also sussing out who’s there, are they possible competition and have they come to bid? After a good 20 minutes or so I register to bid a few minutes before the auction starts.

As I hand over all the necessary documents to the agent, including the authority to bid form, ID and so forth I cast my eye down the registered bidders list and see that there are over 20 parties registered to bid.

I immediately think the auction is going to be well contested and will probably reach the upper price range of what I had prepared my client for. In any case I know the selling agent, vendor and auctioneer will all be extremely happy with the turn out.

As everyone is ushered out to the front yard of the property the sun is shining. It’s a beautiful calm clear day and the auction gets underway with stunning views of Pittwater as far as the eye can see in the background.

Getting ready to bid at auction

The auctioneer calls for an opening offer or bid and almost immediately a gentleman calls out from the back of the crowd with an opening offer just over $1,700,000.

Interestingly it is made with a request. Can the auctioneer hurry up and make it quick as he has another property to go to? The crowd including me laughed out loud.

I and then another bidder join in and the bidding quickly reaches the $1,800,000 mark. At this point the opening bidder runs through the crowd and starts to head down the driveway. As the auctioneer tries to extract another bid from him he responds with ‘I told you I had somewhere else to go’ and continues to run off into the distance. The crowd laughs again.

As the auction continues bidding creeps up in $20,000, $10,000 and lastly $5,000 increments. I wait for some of the other 20+ registered bidders to join in. But they don’t.

The property ended up selling for just over $1,900,000. This was a great but not entirely unexpected result given the current heated market. So after the opening bid the auction was literally a 2 horse race, between one other party and me.

And so that day, despite all the early signs to the contrary, I had seen what I quite often see time and time again. Countless parties registered to bid but they don’t.

The 2 main reasons people don’t bid at an auction

From my experience these are the 2 main reasons someone will register to bid at auction but then doesn’t:

Stage fright – People get nervous and freeze. Instead of getting involved early and putting in a bid they stay silent. Waiting I’m not quite sure for what. For me this is such a huge missed opportunity. Even if you miss out on the property putting in a bid (or a couple) will do wonders for your confidence and better prepare you for the next time you do need to bid at an a auction.

Underquoting – This catches people out time and time again as they don’t do their homework before the day and bidding starts above or quickly passes their maximum limit. Sure there are exceptions to the rule where someone pays well over what seems reasonable for a property but more often than not they don’t. I don’t buy into all the talk about properties selling for hundreds of thousands or more above their reserve. Often this is off a strategically set low reserve the selling agent and vendor are confident will be exceeded on auction day.

You need to be in it to win it

It turns out I was only right about 1 of 2 things I predicted that auction day. Yes, the bidding reached the upper price range I was expecting it to, but the auction wasn’t well contested in terms of the number of bidders.

So from my 20 years property experience there really is no question in my mind. If you register to bid at an auction you must get involved early and make sure you bid. After all you need to be in it to win it.

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If you liked this article you might also be interested in the reasons why a property sells before auction.

Shelley Horton is the founder of Sydney based exclusive buyers agency Albion Avenue. With a 20 year career honing her skills in every aspect of the property industry Shelley knows what makes a property worth buying and how to get the best deal.

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