Bidding tactics to help you win at auction

Auctions have been around since as early as 500 BC during the Roman Empire, and the word 'auction' in Latin means 'I increase'. 

While it's human behaviour to avoid price increases (whether through auctions or multiple-buyer private sales), competitive bidding is often key to attaining the prize. Avoiding it may mean avoiding the prize itself.

When a buyer has success at auction, can they ever put it down to bidding tactics? Absolutely! The number of people we've met who believe that auction success is solely based on budget is surprising. Plenty of buyers believe that bidding style has zero impact on their chances of success.

Of course, we know that some auction results are a perfect correlation with budget. A willing buyer who is prepared to fight in a price war will always have an increased chance of success. 

In other auctions, luck can play a key role, and the outcome can surprise even the most seasoned of us. For example, a key buyer may drop out of the race at the last minute. A bidder may get stuck in traffic and miss the auction. A buyer could lose their job, rendering their finance pre-approval invalid. Maybe a newly listed competing property could steal some hearts and reduce the buyer pool.

However, bidding tactics - carefully planned action to achieve a specific end - are a separate issue. The property community often debates whether tactics are advantageous or useless. Some argue that a tactical bidder has no greater or lesser impact than any other bidder with the final result coming down to the winning bidder's budget. 

We completely disagree. They're assuming that every other potential bidder feels no fear, intimidation, awkwardness, or embarrassment. Yet there are humans out there who would rather miss out on a property than stand in a public space and shout out bids. Like the fear of public speaking - glossophobia - this is very common.

The impact of a confident, assertive bidder staring another bidder down cannot be underestimated. If the other bidder was already uncomfortable and now also feels intimidated, their chances of success diminish.

In our years in the field, we've seen countless examples of bidder behaviour in response to intimidatory or assertive bidding. Despite any amount of planning, people can find it difficult to think strategically under that kind of pressure. They could also struggle to communicate effectively with their partner during any budget reassessment discussions - and we all know how much of a pressure-cooker atmosphere an auctioneer can create during the final stages of an auction call while a hundred other people may be watching on.

Buyers have often come forward after the hammer has fallen to ask for our card or to advise us that they thought we had a significantly stronger budget than we actually did. Agents have commented on our bidding style and have sometimes told us when one of their earmarked buyers decided under the pressure of the auction not to bid. 

The most critical task a capable bidder faces is reducing the time for bidders to rethink their budget or determine an upper limit while the auctioneer is in full flight. This is assuming that the bidder had a plan to start with. 

This may surprise you, but most buyers don't actually have a top-end figure in mind. Most buyers will 'wait and see', with a vague idea of where to start their bidding but little idea about the 'where to stop the bidding' part of the equation. Determining a bidding strategy while a person with a gavel is screaming at you in a crowded street is a recipe for disaster, particularly if you are new to the bidding game.

This is another reason why bidding success isn't only about budget: not every bidder has a firm plan. In fact, from Cate's observations, she estimates that around 50% of active bidders have a vague plan, 30% have a firm and adjustable plan, 15% have a firm and non-adjustable plan, and 5% have no plan. Some of this last group probably didn't leave the house that day expecting to buy a property!

People with a vague plan may have a general idea of what they believe to be the property's value, but they won't have a firm upper limit or a designated 'walk away' price. Their assessment of value will most likely be a round number, and they'll probably be quite prepared to have some flex. They will also likely chat with their partner and make bid-increase decisions during the auction. These buyers are more likely to be susceptible to intimidation tactics and to have a change of heart when the bidding gets tough.

The 30% who have a firm and adjustable plan will likely bid more strongly and be less impacted by others until the bidding enters their 'non-adjustable' price territory. During the final stages of the auction calls, and particularly when the auctioneer is applying pressure to the two final standing opponents, this category of buyer will be feeling the heat while they try to reassess their price in front of a crowd. If it's a couple bidding, they'll typically have been consultative with each other in the pre-auction days, so the decision to stretch the budget in the face of tough conditions will, most likely, also be consultative. Our observation is that consultation with a partner during an auction usually heightens stress levels for the bidder.

The 15% who have a firm and non-adjustable plan may be nervous, but they'll likely apply and bid to their plan and aren't as likely to be rattled by another bidder. Those who hire professional bidders fit into this category - provided they don't have a bidder who will call them or tempt them to increase their budget during the auction.

The final category, the 5% or so who have no plan, are very unpredictable. After all, someone who buys a house without a plan, a budget, or any intention of buying a property that day is on a different wavelength altogether. They may be impervious to any clever, intimidating bidder tactics because they aren't applying much rationale to what should be a very careful decision.

Considering the number of bidders out there who are nervous, uncomfortable, and don't have a firm, non-adjustable plan, a confident and assertive bidder should absolutely have some degree of impact on the result.

7 things not to do at an auction

Buyers are usually unaware, but any of the following hallmarks can enable an opposing bidder to read their nerves:

1. Pacing

2. Smoking

3. Fiddling with their hands

4. Continual checking of their watch before the auction bell rings

5. Partners standing together as still as a pair of statues, even though they're right beside the person they're most comfortable with

6. Not holding a property brochure. Many dedicated buyers won't take a brochure - chances are they've got one already and may have even drawn extension plans all over the back of it

7. Standing behind Dad, while Dad puffs his chest out and puts on his best poker face.

This is an edited extract from The Buy Right Approach to Property Investing (Major Street Publishing $32.99), republished with permission.