How to win an auction, even if you don’t have the most money

With the arrival of the spring property selling season, an ongoing shortage of homes for sale, falling interest rates, rising buyer optimism and more government help for purchasers, the nation’s auctions are set to be competitive.

“It’s going to be a tough season where everyone wants to throw the agent to the lions,” said Peter Baldwin, the chief executive of the Australian Livestock & Property Agents Association, as well as chief auctioneer at agents Richardson & Wrench, labelling it a “Colosseum effect”.

“At the same time, the crowd always takes sides, and you can feel the tension. But the prospective buyers just have to take a deep breath, get out there and bid to buy their dream homes.”

New home listings are still down on previous years, but cuts in interest rates – and the hope for more before the end of the year – are fuelling buyers’ enthusiasm.

Consumer sentiment is also rising and, in addition, in October, the federal government’s expanded scheme for 5 per cent deposits will kick off, further stimulating demand.

But buyers going to auctions have to set a firm budget limit and work out what a property is really worth, advises Dr Peyman Khezr, senior lecturer in economics and expert in auction theory at RMIT. “It’s then important to try not to be emotional at the auction which can make you act irrationally and pay too much,” he said.

“A house might be going for less than you expected which could be good – or means there’s a problem with it. So your homework is very important, and it might be worth getting help from a buyers’ advocate. There are lots of different bidding tactics but, from an auction theory perspective, the person who has the most money usually wins.”

Still, buyers should try to catch the eye of the auctioneer and bid with confidence, Baldwin says. “It’s important to avoid being hypnotised by the process and end up paying over the odds,” he said.

“You have to bid as if it were for any commodity, like a steer or a motorcar or a thoroughbred; try to keep emotion out of it. And be assertive. No one knows what other people’s bidding power is, so if you exude confidence, that’s always a good thing.”

Auctioneer Marcus Chiminello, director of Marshall White, agrees that confidence, or feigning confidence, is an incredibly powerful tool.

“I always say, bid like you’ve got an endless budget,” he said. “You often see people pulling out because they think the others won’t give up, so you have to look as though you have the greatest budget.

“I also recommend bidding in small increments. If you start big, then you have to decrease the amount you’re bidding – a sign you’re running out of money. And do consider hiring a buyer’s agent. They have the experience, and you can often pay them just to bid and negotiate.”

Simone Chin, auctioneer at Atria Real Estate in Brighton, runs coaching for buyers pre-auction as she’s seen so many with “buyer’s remorse”.

“I tell them to do their homework on sales and prices, attend all the inspections and know exactly what their parameters are and ceiling is,” she said. “And I tell them to practise breathing before they go.

“No one really expects the adrenalin surge that happens during an auction, the heart racing. But they just have to bid straight away after the last bid, without hesitation so they don’t give away their power. And if they don’t end up with the keys at the end, then they have to remember there’ll always be another chance, another property.”

Veteran agent Graeme Hennessy, of Premier Property Auctions, has just renewed his auctioneer licence for the 61st year, and recommends buyers start off with a big, knock-out bid – say, $1.9 million if they expect the home to go for $2 million.

“Bidding within 5 per cent of the final price means you’ll knock a lot of people out of the market before they’ve had a chance to bid,” he said. “We auctioneers always think the most important thing is to get people involved in bidding but if you exclude them, the momentum doesn’t have a chance to get going.

“Also, be fairly aggressive about bidding, be bold and make a bit of noise. That can also intimidate people out of the bidding process.”

But be careful not to get yourself offside with the vendor, warns Baldwin. The property might be passed in with you as the highest bidder, but it’s not unknown for a seller to refuse to negotiate with someone they don’t like.

“Bid up but also try to curry favour with the vendor so they will sit down with you afterwards,” he said.