Psyching out the competition at auction

At the risk of being ridiculed (which I probably deserve), here is the big mistake I made in an auction 2 years ago.

Thinking the market had fallen (-5% at the time). I went for an IP purchase. At the auction process I was advised I was the only registered bidder at the auction
- Open auction was told by agent to just lob in a bit (over $700K)
- As the only bidder I opened the bid at $700K
- Vendor then bid $730K
- I was then pressured (and caved) to go to $735K to which the agent said this is below the reserve and the owner don't want to sell. That there was another interested party that would want to negotiate after auction if I didn't close
- Agent asked if I did go to $740K and I said fine if this closes it
- Then owner came back with no we want more.....
- Sold for $760K!!!! Property may have recovered back to this now but probably still be in the low $700s if lucky.


This is how not to psyche out anyone at an auction! I'm now hoping time will smooth over this big boo boo.

TB

 

Thanks for being brave and sharing tofubiscuit.

The greatest learnings can be found in mistakes. I went to an auction 2 weeks ago.

Young couple was the highest and only bidder. Agent brings them inside while auctioneer holds the crowd and the auction remains live.

Young couple come back out and “bid” an extra $80K above their own bid to get the property declared on the market. Crickets from the crowd and then sold under the hammer.

 

Would turning up on a harley with a mongols motorcycle club jacket help ?

 

There is a possibility this property would have been passed in though right?

Was the property worth that extra $80K in your opinion?

For me, looking back I should have just waited for the vendors bid and then held out. If it passed in then we negotiate later.

 

Before going into any auction at the very least you need to know two things and do one thing. Forget all the fancy tactics forget all the bravado eccetera. If you only stick to these two things you will be fine.

1. understand exactly how much the property is worth to you before going into the auction via your in-depth due diligence.
2. know what is your absolute top dollar you are willing to pay and do not bid a cent above that. Not one red cent.

 

The "look like you have deep pockets" one is interesting.
I've seen people buy $2m places wearing addidas trakkies, with matching addidas "pool" flip flops and a scungy old singlet, and baseball cap on backwards.
I must try it!

 

They definitely should have let it pass in on their highest bid and then negotiate.

Don’t know what the agent said to get them to get another $80K jump in one go. Fair game.

Personally I don’t think it was worth the extra $80K and even if they believed it was I think the bargaining position would be strengthened by letting it pass in.

 

You did not happen to see what car the person was driving,if it was a lowered commodore with fast food and empty tally-ho packets in the back seat it may have been someone from this site..

 

Surely not - we are all high-quality proud of our appearance people here arent we?
Actually; these buyers who look like 10 miles of bad road - often their cars usually give them away - often higher-end SUV's etc.

 

It starts as you walk past all the black leased agents amg's merc's that are always parked outside every auction i have been too this year in inner Brisbane ..Some of those agent's do very well and all it takes as the real money always comes out near the end sometimes on the second throw of the hammer combine that with the agent standing next to the target person to influence them then the sky's the limit ..

 

Just to clarify, does "right of first negotiation" mean anything at auction? eg, it's not on market, but "highest bidder will have right of first negotiation"
I hear this line trotted out a lot - but surely a good agent will get in touch with all interested parties?

to be more precise - we missed out on a house at auction, were not the highest bidder, but made an offer post-auction the vendors accepted. So I'm guessing "right of first negotiation" means squat?

For any future auctions, I'm thinking my strategy might be to be the annoying "micro-bidder". You know, bidding in $1000/$500/$100 increments and ******* everyone off.
I think this way, some people would get annoyed and bid super-high (20k/50k increments) to "move the auction faster" and get pushed out sooner or just sick of standing at auction for 5 hours with an annoying bidder :/

End of day if the other buyer is willing to pay more than you, I don't think it matters what strategy you use, you don't want to go past your budget

In fact, it might be better to let that other buyer get the auction property for more - less competition when the next similar property comes up and you can maybe get that one at a comparative bargain.

 

Means you let the agent know your definitely very eager and an amateur at strategy that you wanted to bid against no one else.

 

LOL - "Real estate Trolling"?

 

For when the internet just isn’t enough

 

To me, that is a BS strategy.

For all the properties I bought over the years, I wear daggy short, faded T-shirt and thongs (assuming it is not the middle of winter).

I look like I can’t afford my next meal .

Everyone (especially REAs and the competition) just ignore me, which is exactly what want.

I know how much I am prepared to spend (my limit), I don’t need anyone else to try and guess.

If the sale is via auction (which is not preferred method), I wait until the auction is about to close (at least at “going twice”, sometimes even at “going third and final time”) and I go hard and quick up to my limit.

Most (especially REAs and the competition) don’t see it coming and are thrown by my approach - just what I wanted.

 

I thought I saw you at the pump on your way to bidding.......

 

Nah, that’s my younger brother .

And his car is a lot better than my “auction” car, an 1986 Corona

 

Employing an auction tactic and winning the auction doesn't mean the tactic worked. You may have won the auction by simply placing a higher bid than any other bidder.

To verify a tactic worked, after the auction ask other bidders if they decided against making their highest bid and why.

For example, if they had a limit of $800k but you won the auction with a bid of only $790k, then your tactic worked. But why did the other bidder decide against putting their best offer out there? Think why YOU would quit an auction before reaching YOUR limit?

If we can find a consistent case where other bidders never reach their intended maximum, then we have a valid tactic. I've never seen or even heard of any such data/research.

Note that if your post-auction enquiries found that bidders went above their maximum more often than stopping short, you would have to admit your tactics were actually counter-productive.

 

With investing there are many things you do you'll never know whether they worked or not, or by what degree they helped. For me it's about stacking as many things as possible which would tend to be in my favour as opposed to against.

Stack as many things on your side as you can to increase the probability of a positive outcome. Tbh with all investing that's really all you can do. Any kind of investing is speculative. Some may be alot lower in risk on the spectrum of speculation. But imho it's all speculation.

 

Usually the only ones you can “psych” out are the bargain hunters (who are knocked out anyway once the bidding reaches realistic levels) or those who have reached their limit (probably a sensible decision for them).

To think that you can use tactics to stop a genuine, enthusiastic buyer bidding up to their own absolute maximum limit is wishful thinking.

You may credit your “tactics” with winning the auction, but the truth is that you were prepared to pay the most, be it by increments of $5K or just $50. Or, in a recent nearby auction, an increment of $8,888.