How to Slow Down an Auction
How to Slow Down an Auction
At any auction where your aim is to buy property, you have two adversaries: the first is the vendor/auctioneer team, and the second is the other bidders. One strategy which can be used is to slow down the auction.
Here is how to slow down an auction:
1. Change the size of the bids
At any auction where your aim is to buy property, you have two adversaries: the first is the vendor/auctioneer team, and the second is the other bidders. Your first goal at an auction is to have the property passed in to you. How do you manage this? It’s really quite simple. Don’t bid in the amounts the auctioneer tells you to bid in. If the auctioneer is asking or $50,000 bids, offer $10,000; if they don’t take your $10,000, challenge them to see who else is offering $50,000. If you put them on the spot they will have to take your $10,000. If you keep breaking them down to $1000 increments you will save a lot of money.
A high profile property in an expensive suburb was being auctioned and bidding was very subdued. The auctioneer was running up the bidding in lots of $50,000. At a point $200,000 less than what we though the reserve would be, I walked up to the auctioneer. put my arm around him and said, “I will give you $1000, Mr Auctioneer.’ The auctioneer replied, ‘David, I am in $50,000 increments and I won’t take your $1000 bid.’ I challenge the auctioneer again: ‘You haven’t got a real bid yet, have you?’ By this stage, control in the auction had shifted and the auctioneer was wary and replied that he might have one. I asked him to show me this real bidder. Of course he couldn’t and he reluctantly took the $1000 increment. This prevented the price going up by $300,000 in $1000 bids. The property was passed in and I was able to buy it.
Alternatively, by changing the increments in the bidding upwards, you can send a clear message to your other adversaries – all other bidders – that you have the ability to buy the property. Don’t be afraid of using ‘killer bids’ if the need calls for it.
2. Are you in a position to sell?
Once the bidding has started, you should ask the auctioneer this question: ‘Are you in a position to sell?’ In other words, is the property market or are we just play-acting? Continue asking, ‘Are you in a position to sell?’ The auctioneer will turn around and say, ‘Not yet.’ You should reply that the price has reached the estimate quoted during the campaign, so why isn’t the property on the market? Each time the auctioneer takes a bid, ask again: ‘Are you in a position to sell yet?’ It’s all about having control of the auction process. The auctioneer will eventually say that they will have refer to the vendors. Continual interaction with an auctioneer also slows the pace of the auction.
We were asked by a client to buy a two-story Victorian terrace in inner-city Sydney. It was described as a ‘trendy’ property with great renovation and had created a lot of interest. My client only wanted to spend $800,000 although the property was clearly worth like $1 million. In fact, the bidding opened at $280,000. While I was standing next to my client explaining what was happening, he had a change of heart and decided he really wanted that house, so I entered the bidding.
At Sydney auctions agents go from one bidder to another during the auction, speaking to them and trying to get people to bid more. I followed the agent from bidder to bidder, asking what she had said to them to see if it was the same that she had told the other bidders, who wondered what was going on. In fact I said to one bidder, ‘You don’t know what you’re doing, do you? And I would appreciate it if you would kindly refrain from costing me any more money.’ He looked at me like he had been slapped in the face with a dead fish. He didn’t make another bid. My outrageous behaviour of competing with the estate agents at their own game clearly put other potential bidders off their bidding. They couldn’t work out what was really going on, who was real and who wasn’t. They therefore refrained from further bidding, enabling me to secure the property for my client. Don’t be afraid to follow the agent around the auction if they are talking to the other bidders. You need to find out what is or isn’t happening and if you don’t it could cost you a serious amount of money.
Once the auctioneer goes inside the house to speak with the vendor, your actions may depend on how long they spend in there. If they are only there for a short time, there probably isn’t a real bid or the property is suddenly on the market. It is when the bidding reaches a level that the vendor is prepared to accept and the auctioneer may knock it down to the highest bidder once the building has ceased. This is the point when the auctioneer announces that you are bidding for keeps and the right to own the house. Some real estate agents use the half-time speech or negotiation twice during an auction. This is an exaggerated form of role-playing that they are trying to persuade you that they have a real bidder who is close to the reserve and they are trying to get the vendor to accept it. It is more than likely that they haven’t got a real bid, but are just trying to entice you to pay more money. If the auctioneer is with the vendor for a long time, they are trying to persuade the vendor to accept the bid that the auctioneer is currently holding. Given that, you have to wait and see what happens. Use this time to your advantage. If you are uncertain whether someone is a real bidder or not, go up and talk to them. Ask ‘Are you here on behalf of the vendor or are you a real bidder?’ While some will be professional paid dummy bidders, some will just be friends of the vendor and will find this questioning uncomfortable. If someone is a real bidder, stand next to them. The auctioneer is only going to take bids, this person is your opposition, and you have to convince him or her not to pay any more money.
I was at an eastern suburbs auction run by a veteran auctioneer, I was bidding against another genuine bidder. At $550,000 I asked my favourite question: ‘Are you in a position to sell, Mr. Auctioneer? Is the property on the market?’ While the auctioneer referred the bid to the vendor, I approached the other bidder for a curb side chat. The auctioneer returned and announced that the property was on the market. He was noticeably upset to find me talking with the opposition. After some confrontation with the auctioneer during which he asked me to move away from the other buyer, and I replied that I was a buyer and that the other bidder was costing me money, no more was said by the other bidder. The auctioneer was angry as the property was now on the market and he didn’t want to sell it to me. He asked the crowd for further bids. There was none!
– David Morrell
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