Even if you are fiercely determined to avoid being caught up in an auction when buying, you still may find yourself having to bid at one to secure your dream home.
At an auction, the property sells to the buyer who submits the final bid above the vendor’s reserve price. Most people attend auctions without a bidding strategy. The good news is you may win an auction without having reached your predetermined maximum price. The bad news is you may be the under-bidder at a few auctions before you win one.
But there are bidding strategies that you can adopt to give yourself every chance of winning an auction.
While you may have watched many auctions, there is a different element at play when you are bidding. Patrick Bright is one of the original buyer’s agents in the Sydney property market. His experience is invaluable in understanding the undercurrent at play and how best to manage the auction, the auctioneer and the competing bidders.
Bright reports that there has been a noticeable increase in the number of buyers that now employ someone to bid on their behalf at auction. A vendor will readily employ a selling agent to maximise their price.
Therefore ‘it makes sense that more people are hiring someone of equal knowledge and skill to save them money when buying’ he says.
Bright encourages those that think ‘registered bidding’ has killed off the ‘dreaded dummy bidder’ to think again. From experience, he is convinced that dummy bidders are still very much apart of many rampant auctions. It is conceivable dummy bidders could be placed by either the vendor or the agent; however, Bright believes few sales agents would take such a risk.
Auctions need competitive bidding to perform. As a vendor, it is so simple to ask a friend to register and bid up to the reserve price, creating the illusion that the property is in demand.
How do you have an auction with one buyer? If you are an agent, you under quote the price to attract more bidders. According to Bright and others in the industry, you may also be bidding against a dummy bidder, placed by the owner or agent!!
Each auction is a fluid and unpredictable event.
The simple advice for buyers is to avoid bidding unless the property has met or exceeded reserve. In the past, less skilled auctioneers would call the property on the market as soon as it hit reserve.