Real Estate Auction Bidding Tips
How do you get the best property for the best price? A lot of that depends on the bidding process. Don't make the mistake many amateurs make and over-bid for a property. Here are some tips on how to bid and how much to bid in order to get the property you want at the price you want.
Bidding at auction
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Do not be one of the many people who pay too much as auction. It's well documented on television programmes that cover property auctions such as "Under the Hammer" that people lose thousands because they have not structured their thinking to consider all the costs involved.
Be there for the opening speech
The Auctioneer's opening speech allows everyone to know the format for the auction.
It is essential to be at the auction before the start and before the auctioneer's introduction to the auction. Even if you are only interested in a lot at a later time make sure you listen to the opening remarks with care and then come back later.
Normally the opening speech will contain:
- A welcome to the auction.
- Any news on any withdrawn lots and how the auction will run.
- Any changes to the lots published in the Auction Catalogue. i.e. Amount of rent
- A declaration of being able to bid on behalf of the sellers and proxy bids.
- The methods of bidding allowed.
- What will happen with regards to obtaining the purchasers details.
- How much deposit is to be paid by the winning bidders.
- What happens after you have won. (What you need to do)
Basics of bidding
- The auctioneers recommends that you to sit right in front of them. Always remember the fact is they want as much money from you as possible of course.
- Make sure you look the auctioneer in the eye when you bid. Make your first bid by making a major movement, i.e. waving your catalogue.
- Bids after your first bid can be less obvious. You can use a raised finger, a nod of your head, a wink, a raise the paddle or a flick of the catalogue.
- To bid less than the increment asked by the auctioneer, state your bid loudly to him. The auctioneer can choose whether or not to accept it.
- Make sure you keep looking at the auctioneer in the eye until the lot is yours or you want to stop bidding because you have reached you price ceiling.
- You will only have an accurate price ceiling if you are aware of all the costs involved in buying at a real estate auction house. Have an exact figure written down. It is all too easy to let your emotions run away with you when bidding on a property. Do not overpay for a property! You must know at what price that property no longer makes good financial sense for you. Determining that price involves knowing all the costs involved. Our FREE! and easy to use Property Auction Calculator will show you what costs you need to look at and will automatically calculate your bidding price.
- To bid less than the increment asked by the auctioneer, state your bid loudly to him. The auctioneer can choose whether or not to accept it.
- When you want to stop bidding don't gaze at the auctioneer and don't speak. You can shake your head the next time the auctioneer looks at you.
- " If you want to come back into the bidding at a later stage again show some major movement again. Also don't worry if you are scratching your head, the auctioneer will know you are not bidding.
Bidding tips
- Never ever bid higher than your maximum bid or price ceiling.
- Don't be intimidated by anyone that includes the auctioneer and other bidders into paying more than this.
- Only bid on something up to the maximum bid and not because it looks nice or it has no reserve. Stick to the rules. What is the amount of profit in the purchase. Do you know what it is? If not find out!
Expert tips
A lot of expert bidders stand at the back of the auction room so they can see all of the proceedings and everyone bidding.
Try not to stand out and blend in with the crowd. More experienced bidders don't want to attract a following i.e. people using them as their bidding strategy.
Maybe you have done all your homework. Someone may use your bidding limit to bid on, maybe just above your maximum bid.
What do you need to look for when selecting a property at auction?
Bidding tactics to put off the competition
Jumping bids
If the price is way below the price you wish to pay you can use the Jump Bid strategy by shouting out a figure higher than what the auctioneer has just asked. This could put an opposing bidder off their stride. This strategy hopes to convince other bidders that you will always go higher than them and will discourage them from putting in any more bids.
Reducing the size of the auctioneer's increments
If the auctioneer is going up in £1000 increments you can try to reduce this to £500 thus trying to reduce the final amount paid. If the price is near the reserve some auctioneers may bring their increments down. But all auctioneers know that by keeping the increments as high as possible they will achieve a higher price than they might otherwise. Try to reduce the increments in the early stages if you can.
Bidding high
Some time after the bidding has started possibly at a low price, bid a high amount somewhere close to the reserve and try to scare off the competition. This can have the effect of convincing the competition that you are bullish about obtaining the lot.(similar to a Jump bid)
"Bids off the Chandelier" or "Off the wall"
If the bidding has stopped more than one increment below the reserve, the auctioneer can then take a bid off the chandelier on behalf of the vendor.
This is specified in the conditions of the auction and allows the auctioneer to sell the property at the reserve. The bids are not from anyone in the auction room but made by the auctioneer so the property will reach reserve and sell at auction.
If the auctioneer is good at this you will not be able to tell that he did it. If he is not that good you may be able to judge that the bid was made by the auctioneer and there is no competition other than the vendor and so act accordingly.
What happens if the lot is withdrawn or remains unsold?
If a property fails to reach the reserve price, it will be withdrawn from the auction and the auctioneer will invite anyone still interested to talk afterwards. Sales can still be made if a price is agreed with the seller. You should call the real estate auction company 24 hours before the auction to see if the property has been withdrawn. Properties get withdrawn from the Auction for various reasons i.e. sold before the auction, incorrect details or change of mind. If you have paid out for surveys and arrangement fees etc this is not great news. You have no entitlement to damages if the property does not go through to auction.
Some investors target only unsold lots. If a lot fails to reach its reserve price i.e. the minimum price that is acceptable to the vendor in the auction room, it may be possible to agree to purchase the property if the seller is present immediately after the auction or in the days following. Unsold lots are good for nobody. The auctioneer misses their commission and the Vendor is stuck with a property that they don't want. If you approach real estate auction companies with an offer that is above the final bid, then they will try to help you. You may not get it less than the reserve (try as you might) but the auctioneer will try to help. This is a strong position to be in and remember to always negotiate hard and stick to your bid limit.
Make money off your property. Plus get a competitive advantage over less educated bidders. Use our FREE! and easy to use Property Auction Calculator to determine all the costs involved and instantly calculate your top bid price.
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