How to bid at auction
The glib, simplistic version
On the face of it, bidding at auction is simple. You go into a room with some other people and everyone takes turns calling out prices until the person who is prepared to spend the most money makes the highest bid and buys the property.
It actually is that simple, but first you need to know a few things.
The property will be auctioned ‘on site’ – at the property – or ‘in rooms’, with other properties at the real estate agent’s office or at a function centre.
In some states, you are required to register to bid by providing your contact details in exchange for a bidder’s number.
Often a bid is made on behalf of the vendor – sometimes it is the opening bid to get things started. The auctioneer will declare if it is a vendor’s bid. If the price has gone beyond the ‘reserve price’ then the property will sell to the highest bidder. The auctioneer will use phrases like, ‘On the market’ or, ‘The property will sell today’ to say that the bidding is above the reserve price.
If the property does not reach the reserve price then the highest bidder has the right to negotiate a sale price with the owner. If they fail to agree on a price the
estate agent will often contact other bidders to see if they want to make an offer – so it can be worth waiting around if the property passes in.
If you win the bidding you will be required to sign the contract of sale straight after the auction, and pay a deposit of,usually, 10% of the purchase price. You can pay a deposit with cash, a personal cheque or a deposit bond, which will cover the bond for a period while you liquidate investments to raise the cash.
First, have your finance in place before the auction. You need to be certain that you can buy the property if you win the bidding and you need to know exactly how much you can afford. Your Loan Market broker is familiar with the process and can make sure you go into the auction room well prepared.
Write down two numbers on a piece of paper – the amount you are comfortable spending and the absolute top price you are willing to pay – and take them to the auction. Bidding is surprisingly stressful and those two numbers are the only things that you must not forget in the heat of the moment.
Make sure you ask for a copy of the contract ahead of time so that your conveyancer can advise you on any issues – you need to be prepared to sign the contract straight after the auction.
Because you asked for the contract, the estate agent knows you are interested in bidding. They will look for you on auction day and make sure that the auctioneer registers your bids.
Bid confidently, in a clear voice or with clear hand signals to the auctioneer.
Respond to other bids quickly, in sensible increments. (Don’t try to intimidate the other bidders with large bids – the ones who can afford it won’t be intimidated and the ones who drop out would have anyway).
It is worth attending another auction, before you bid, so that you can see what happens. You could even bid for something cheap at an art or estate auction to practice.
Watch the room
Many bidders like to bid from the back or the side of the room so that they can see the other bidders. It is useful for reading body language - that’s where the confidence comes in – and makes it easier for the auctioneer to see you.
Don’t stop until you have to
Bid confidently and maintain your rhythm until you reach the higher of the two numbers written on your piece of paper. While having the most money is your best tactic, in the final few bids, where you are both above your ‘comfortable’ number, it may be your confidence that undoes the other bidder and makes them stop first.