Buying a House at Auction: 10 Secrets of Success
You’ve found the house — now, how do you make sure you win on the day? Three Auckland experts — veteran auctioneer Mark Sumich, Bayleys agent Sam Yeung, who successfully bid on the most expensive house on TV’s The Block last year, and property investment coach Ron Hoy Fong — share their strategies.
Do your homework. Study sales figures and CVs and visit a number of auctions of similar homes in the same area to work out the market value of your intended home. Then, in a rising market, be prepared to pay 10-20 per cent more. “You have to know what the thing is worth to you,” says Sumich. “Come to the auction with three prices in mind. One you’d like to pinch it at, one what you think it’s worth and one that you might be prepared to pay for it.” Visiting other auctions first will also get you familiar with the strategies and structure.
Consider using a professional bidder. Asking a real-estate agent or similar to bid on your behalf makes sense if you think the exercise may be too nerve-racking for you. It can also be valuable if the professional is well known in the industry: they might scare your opponents away. “If you’re in the forest and you see the tiger coming you’ll run away… but if you see a rabbit…” says Yeung.
Hoy Fong warns, however, to be wary of being pushed higher than you want to go by agents bidding against other agents with an eye on their commission.
Don’t bid until you have to. Hoy Fong says if your maximum price is an even number, bid on an even number. Yeung says he usually comes in when the bids are about 80 per cent of what he hopes to pay. That will usually make the bargain hunters drop out and make other bidders realise you’re serious. “Personally, I prefer a big first bid but sometimes my buyers don’t.”
Watch the room. Find a place you can watch your rivals from, and analyse their body language. Be aware of yours, too: other bidders and the auctioneer are all watching.
If you give away how much you want it, you’ll tip the auctioneer off and they may not accept small incremental bids, knowing you will bid higher anyway. “You can spot keenness in their eyes,” says Sumich.
Likewise, if you see your rivals in anxious or lengthy discussions, you’ll see they’re on the ropes. Hoy Fong says bidding at an auction is like a game of poker — often the best bluffer wins.
Bid quickly and confidently. Be brave, so your opponents think you’ll pay whatever it takes. Putting in a bid twice the size of the increments the auctioneer is asking can be a good ploy, to knock out weaker opponents. Yeung says he was the fastest of any bidder at the auctions on TV3’s The Block last year. “Don’t be afraid,” says Sumich.
Hoy Fong says he sometimes just leaves his hand up. But, he adds, it’s important to slow the bidding down when you’re closing in on your limit. He suggests halving your bid to $5000 about 20 per cent before your maximum, and halving again to $2500 when you’re 10 per cent away. You can slow the bidding still further with $500 increments if need be. “The auctioneer will want to speed things up — you want to slow it down.” Slowing the pace — and taking the heat out — of an auction can tempt your rivals to stop and think, and then reconsider their position.
Set your limit slightly above a rounded figure. Many buyers set figures such as $800,000 or $1 million, says Yeung — if you can push it out to $815,000 or $1.05 million, they might just bail before you.
Ask the auctioneer a negative question. “Is the property still subject to road widening?”; “Is the second kitchen in the sleepout legal?” It might, says Hoy Fong, be enough to scare off some rivals.
Write your limit on your hand. And tell others (non-bidders, of course) what it is. It’s a way of stopping yourself getting sucked into the thrill of the chase. Have other properties lined up as “plan B” to blunt the pain of missing out.
Don’t take a whole bunch of confidantes. “Don’t have a family discussion before each bid because everyone will want their five cents’ worth,” says Sumich. “Mostly the confidantes are hand brakes. If you want to miss out, that’s good.”
Be ready for the auctioneer’s mind games. Sumich says his job is to provide a reason for bidders to improve their bid. Likewise, watch the auctioneer for signs the property may be close to reserve. “If he consults with the vendor and it’s a short discussion, it probably isn’t. If it’s a long discussion, it probably is,” says Hoy Fong. If the property is passed in but you’re the top bidder, play a bit hard to get after the auction. “You may want to offer less than you bid.”