There are many ways to buy a home, but the Perspective team has noticed that auctions are rapidly gaining popularity for both sellers and buyers. From a seller’s point of view, auctions can be an extremely lucrative method of capitalising on competition between different prospective buyers, whilst for an interested buyer, there’s a transparency at auctions that you just don’t get in a private treaty or sale by expressions of interest.
However, the whole process of bidding at auction can be nerve-wracking and confusing, complete with weird hand signals and a lot of masquerade. So what is an unsuspecting buyer to do?
We spoke to resident Independent Property Group Inner North & City expert, auctioneer Mark Larmer, about the ins and outs of the auction process, including his top tips for prospective bidders and buyers.
Mark, what does everyone want to know about bidding at auctions?
Everyone asks for my tips or recommended tactics. We actually shot a YouTube video that gives a few tips and strategy techniques. Bidders can refer to that for a few tips that might give them an edge to make sure they’re the one that walks away with the property. Often bidding high from the outset works as a strategy to win an auction.
How do auctioneers learn to talk so fast? Is there an auctioneer speaking school?
Not all auctioneers do talk fast and everyone has a different style. Some are quite fast, some are more conversational. We talk quickly when we’re trying to build momentum and a sense of urgency during an auction. It’s part of the rhythm and the flow of the event. Some auctioneers are quite slow and maybe a bit boring—they just call out the numbers during the auction, which can take a bit of the excitement out of it.
What happens if, for instance, a bidder’s child accidentally yells out, “Two million dollars!” – can someone be held responsible for an accidental bid?
The short answer is, no. Every bidder needs to be registered and given a paddle number so that when they actually make a bid, the auctioneer will check the paddle and acknowledge them. You can’t just make a gesture to bid.
As for a child making a bid, I’ll probably have some fun with that. I might say, ‘That’s a great bid sir, you’re very ambitious!’ But keep in mind only registered bidders can make legitimate bids.
What’s one of the funniest or most surprising things that’s happened during an auction?
Once, a lady ran through the crowd at the last minute, literally just as I was about to sell. She was a jogger wearing headphones, so I ran alongside her and asked her for a bid as she was running, just for a bit of fun.
Are you ever surprised by a high bidder or find someone completely unexpected wins the auction?
Even an experienced auctioneer can be surprised by late bidders. We often have an idea of who the serious buyers may be, but time and time again, we’re surprised by people who have only visited the property once and don’t want to tell the agent how much they like it. They play it cool.
What happens if two people bid at exactly the same time?
If this happens, the auctioneer can pick one bidder at their discretion, or ask for clarification. If it’s crunch time, there could be a dispute. The auctioneer can cancel the bid and ask for the bid again.
Be quick with your bidding and make sure you’re ready. You don’t want to miss out by half a second because you’re too slow to hold up your paddle. You’re much better off standing at the front and making sure the auctioneer can see you rather than hiding behind a tree.
Why does an auctioneer make an announcement that a property is officially ‘on the market’?
It’s a way for an auctioneer to let the crowd know that the vendors are serious and ready to sell the property immediately. An auctioneer may want to get a second bidding war happening. That can sometimes spur on the buyer who is hiding out at the back. It’s making it very clear that the property is going to be sold. We’re trying to get the best price we can without any ambiguity.
What’s the deal with vendor bids? Isn’t it against the rules for owners to bid at auction on their own property?
Owners can place a vendor bid, but only once. A vendor bid can really help to increase the bids again if there’s been a pause. But no, an owner can’t just pretend to be someone else and hide in the crowd.
Why would an auctioneer start the bidding lower than the reserve?
This could be for a couple of reasons. First, the reserve might not have been set at the proper market value. The owners can set the reserve at any price, but if they set it at $500,000 and people only want to pay $480,000, then the reserve is too high.
Another reason is getting some momentum going during the auction. Bidders may be hesitant to bid at first until a few bids have been recorded.
If I get carried away and bid more than I can afford, can I cancel my bid?
Once the property has been announced as being available for sale, you cannot withdraw your bid. So, if you’re a bidder with a pre-approved amount from a bank, then you may have to pay the extra amount from your own savings or cash.
The auctioneer will abide by the rules of auctions and ensure that only genuine bidders can participate by pre-registering beforehand. An auction gives some assurances that proper processes will be followed and that no fake bids are allowed.
What happens if you’re interested in two properties being auctioned at the same time? Is it possible to bid on two auctions at once?
You can sign a letter of authority for a family member, authorising them to bid on your behalf while you bid at another auction. It’s probably best to have one property as your number one and the other as a back-up. You don’t want to get into a situation where you’re the top bidder on two different properties at the same time! You’d end up being legally obliged to buy both properties.
What are your top tips for bidders at auction?
- Bid confidently
Even if you’re on a set budget, bid as though you have no limit.
- Bid in odd increments
Do the unexpected or bid erratically, so others can’t guess your limit.
- When you have a limit, have a buffer
A buffer of a few thousand dollars can be the difference between owning the property and walking away empty-handed.
- Watch body language—your own and others
Other bidders may give an increment on how close they are to their limit. You’ll see people shake their head or cross their arms, indicating the bids have passed their limit. You and your partner (or family) should watch your body language or you’ll give your game away.
So that’s it in a nutshell, right from the auctioneer’s mouth. Bid confidently, know your limit, give nothing away and play by the rules. Easier said than done when we’re talking about one of the biggest transactions of your life, we know…good luck!