Sometimes in an auction you will strike aggressive bidders. In this case it’s no good if both parties keep throwing in bids aggressively. You will end up paying $300,000 – $400,000 more than you want to very quickly. In this situation you have to slow down the bidding process and this means slowing the auctioneer down. When they come back to you to see if you want to make another bid, say, ‘Hold on a second, let me think about it.’ The auctioneer will try and force you, but won’t sell to the other bidder in the meantime. You simply stall: ‘I’ll give you a bid, just let me think about it for a moment.’ This in fact gives everyone time for a bit of a reality check; when people get caught up in the adrenalin of an auction, sometimes they aren’t aware of what they are doing. Start talking to the opposition – ‘This is a lot of money and I want to think about it. I’m sure that the other bidder wants to think about it too, instead of throwing $50,000 and $100,000 at you in 20 seconds.’
After introducing myself to several interested parties at an auction, I worked out that there was a lot of interest in this particular property, a double-fronted Victorian brick home. I didn’t need to stand next to the auctioneer here; I needed to stand next to these potential buyers. I established that one was an investor and the other was a home owner. I discussed the merits of having to compete against a home owner and pay top price to secure the investment with the investor. Arguing that investments are only as good as the price you initially pay for them, we also discussed what we thought the property was worth. I tried to glean from both bidders what their limits were. The investor said he was prepared to go to $600,000. The home owner said he was prepared to pay more than $600,000 but was keeping his cards close to his chest.
The three of us bid on the property and it was put on the market at $595,000. It was about to be knocked down to me at $620,000 when the investor suddenly decided to throw in another bid. When I asked what he was doing, he sheepishly replied that he wanted to make sure I had $650,000. At this stage the other bidder had dropped out. I argued with the investor that if he paid $650,000, it wasn’t going to be a good investment, whereas my home owner client loved it. After some discussion I offered to find him a better investment, not at a premium price, and the property was knocked down to me.
Don’t be afraid to talk to the other bidders, as often common sense will prevail, especially if you are bidding against an investor and you are an owner-occupier.
– David Morrell