BIDDING at auction is like a sport. There are competitors, spectators, an umpire, game plans, and in the end, there are winners and losers.
It isn’t as easy as turning up with a price limit in mind and calling out some numbers. There is actually a lot more strategy, endurance and psychological tricks involved, reveals Damien Cooley of Cooley Auctions.
Auctions are touted as the most transparent way to sell a house — and they are. The open market determines the price, rather than a closed door deal between a seller and buyer.
But auctions also thrive on momentum, which is why you can turn up confidently only to be left in a spin within a matter of minutes because the property you thought was in your price range just sold for money you can only dream of.
“When an auction has momentum it can sell really well and a buyer can, in many cases, find themselves in a scenario where the bidding started at $800,000 and all of a sudden we are at $965,000,” Mr Cooley told news.com.au.
“What that means is the buyer needs to act quickly and make fast decisions — and it is those spare of the moment decisions where the auctioneer’s role is to get that buyer to continue bidding.”
HOW TO THROW YOUR OPPONENT OFF
Sounds intimidating, but Mr Cooley says there are a few sneaky tactics that a buyer can employ to slow the momentum and steady the decision making — much like the captain of a sports team can slow the game if it is getting sloppy.
An effective way to do this is to bid in odd increments and call our your actual bid, not the total price.
“If the auctioneer is asking you for $10,000, there is no reason why you can’t give them $13,000. But don’t call out the number you want it to land on, call out the increment you’d like to bid in,” Mr Cooley said.
“If the auction is at $920,000 and you bid another $13,000 that is easy to add up but what about if you made another bid of $18,000? And don’t say $951,000 because that is easy for the auctioneer. If you just call out your bid of $18,000 the auctioneer has to think about it add that up in their head.”
And it’s not just about slowing the pace of the auctioneer; this tactic also throws other buyers off, slowing momentum even further.
“Most buyers will land on a round number, so most bidders will go to auction saying we are going to pay $900,000. That’s their limit and they won’t go over it, it is a psychological thing .”
When bidding at an auction you also have to adjust your strategy accordingly; every auction is different. For instance, the amount of competition you have really matters.
For a lot of competition at a large auction, Mr Cooley said you have got to be confident and aggressive.
“If you can see there is a lot of competition then you are going to have to bid aggressively. I would argue that the best way to bid in that scenario is to come in with a really aggressive bid first,” he said.
“This is firstly to show your confidence but also and if an agent has quoted $1 million and you know you’re willing to pay up to $1.35 million, I guarantee you that some of your competition are thinking it will go for between $1.25 million and $1.35 million. So there is no point starting the auction at $1 million and giving everyone hope.
“In that scenario I would come in with a strong bid at $1.2 million and that will send an immediate shockwave through every single person at the auction and it will stun them that someone has started the bidding so high.”
WHEN TO KEEP YOUR COOL
On the other hand, if you can only see there is one other registered bidder, then Mr Cooley said to play your cards a little bit closer to your chest in that same scenario.
“I might start the bidding at $950,000 and let the auctioneer tell me if they are happy to accept it or not. If they say no then you can guarantee that the owner is not selling at that price. And that’s okay, that’s not offensive.
“So if they the auctioneer said no, sit back and see if anyone else bids. If they don’t the auctioneer may use a vendor bid. If they do make a vendor bid, you then need to consider if you want to bid above that or get into a negotiation.
“You have to remember that if you don’t make a bid, the post-auction is open to any bidder but if you’re the highest bidder, you have the first opportunity to negotiate with the seller. So I’d always recommend that a buyer bids above that vendor bid — assuming they are happy to pay that price for it.”
WATCH FOR BODY LANGUAGE CUES
Competing at auction isn’t just about how you present yourself. Just as important is keeping an eye on your opponent.
“It is important to watch what your competition is doing because their body language will tell you a lot about how much further they are prepared to go,” Mr Cooley said.
“Stand in a prominent position where you can see what your competition is doing — their facial expressions, body language, and whether they are talking. ”
And the same goes for your actual auctioneer, he said.
“This is important because every auctioneer calls an auction differently. You should research them and watch how they trial close, watch their speed and watch the little things they do and say … I’m always actively looking to convince bidders to bid particular numbers because I’m thinking three or four bids ahead of what the number is I’m asking for.”
Originally published as Mind games to win at auction