How to handle an auction ?

[lissie]

My mother in law wants to purchase a property which is for auction this week. We have done the due dilgigence - have a good idea of what the top she is prepared to pay. My question is what sort of tactic to engage in at the auction. I havent bid at an auction before (I dont use them to buy IP's). I am hoping that we will be the only bidders (based on lack of people at the last 2 open homes - only one other group at the last open home this weekend). I know that the vendor has turned down 2 or 3 orffers of less than we are prepared to pay, and have been told by the agent what the Vendor's price expectations are (unbelievable what they will tell you ). We can afford his expectation (plus a fare bit more). Question : what happens if no one opens the bidding - I assume there is a vendor bid ? If it is then looking like being passed in should I bid $1,000 more to be the top unsuccessful bidder and then negotiate from there (afte the auction). Alternatively if I bid iwill the auctioneer then bid against me until we get to reserve - is he allowed to do that ? Do they have to say when the proeprty is on the market ? (as per the TV shows ? Alternatively if there is no other bid do I just shut up -wait for the property to be handed in and then negotiate on that day Pros/cons either way ?

If there are other real bidders I was thinking of staying out under they get to the 2nd/3rd call and then bid (assuming the price is OK) - can I ask if the property is on the makret thne before I bid ? I believe if there are mutliple bidders but the property is still handed in the Vendor must negotiate with the top bidder 1st - is this right ?

Any suggestions would be helpful ...

[inzvestor]

Hi Lissie

You have a fair grasp of auctions - so should be fine.

A few quick answers;
The auctioneer will usually state when the house is 'on the market'
The auctioneer will usually state if he uses vendor bids to reach the reserve or may look to colleagues who have phone bids.
Auction terms will be clarified verbally prior to the auction taking place - regarding negotiations with top bidders (if below reserve etc)
Generally speaking you will have first right to negotiate but must be prepared to put money down there and then if you are successful (as with the auction anyway)

Emotion is the biggest hurdle - if you get carried away it can cost you thousands of $$ extra - but if you think of it as a poker game then you should be fine.
Don't appear too keen when speakign to the agent prior to the auction - this may help save you $$

Oh, and good luck !!

Keep us posted.

[lissie]

Cheers - thanks for that. Yes poker I can do - and fortunately mum in law is pretty bloody good at it as well . Unfortunately by doing a building inspection the agent knows we are serrious - but there are other houses out there - so hopefully mum needs the house less than the Vendor needs to sell ! Must admit Ilove the negotiating bit - its a just bit harder when its on someone elses's behalf and they like the house well enough to live in it ! The thing that makes me sad is that if I'm right and we are the only interested party we pay $10,000's less than our top dollar and the Vendor would have done much better at closed tender - but this particular agency LOvES auctions !

[cube]

Re: How to handle an auction ?

We have done the due dilgigence - have a good idea of what the top she is prepared to pay.

Sorry - not good enough If you are bidding, the bidder must know exactly the top $ they can to go to.

If you are keen on the property, and your top $ comes out at, say, $200,000, agree to go to $201,000 - that way you can out bid someone else who's top is $200,000 (assuming they don't get all emotional about it!)

The auctioneer may something like 'I reserve the right to bid on behalf of the vendor" before starting, but I would have thought it unlikely that any individual bid is identified as such.

You can ask if its on the market (in fact, you can ask anything you like) at any time, although the agent starting to rub their hands at the thought of their commision is usually a good sign!

Yes - wait for the 2nd call before starting (sort out the wheat from the chaff). Then, bid in the auctioneer's increments assertively until you reach top $ then turn away - don't even give the auctioneer the chance to talk you up another $500. Whoever is doing the bidding, don't consult with anyone else, just respond instantly when a competing bid comes in.

If it gets passed in and you are top bidder, the negotiations are still under auction rules (no matter how long they take!) until the property is either withdrawn from sale or re-marketed. That means that if the vendor says 'Yes', you've got a deal, no ifs, buts or maybes.

If you can't agree a price, wait for it to be re-marketed, and start where you left off or just below.

If it doesn't get re-marketed, then the vendor's contract with the agent may have expired (not sure on this), so you may approach the vendor privately saving everyone some $.

Good luck - let us know how it goes.

Happy bidding

cube

[inzvestor]

You can also bid for less than the auctioneer is asking in increments (say he says I'll take thousands - you can add a extra $500. As long as your bid is higher (and the bidding slow enough) you sould get the bid accepted.

[Marcus]

The thing that makes me sad is that if I'm right and we are the only interested party we pay $10,000's less than our top dollar and the Vendor would have done much better at closed tender

I'm sure the vendor would be more than happy to accept the additional $10,000's if it makes you feel any better.

Unfortunately by doing a building inspection the agent knows we are serrious

They may not know that you have a (fictitious) conditional offer out there waiting for if this property exceeds what you are prepared to pay. :twisted:

I'm also a fan of standing near the front along a wall so I can see all bidders (ie don't sit at the front of the room with your back to everyone).

Good luck!

Marcus.

[lissie]

Thanks guys for all the tips Marcus I was going to sit at the back so Ican see what is going on - and to check if the back wall is doing much bidding ! And yes Cube Iam getting an agreed top dollar - good trick to make it an odd number .

[Marcus]

I was going to sit at the back so Ican see what is going on - and to check if the back wall is doing much bidding !

Go to a few auctions prior to the one you plan to buy at (time permitting). Try watching who's bidding from the back of the room, and then try it from the front standing along a wall. Note the difference.

From the back you may get a close up view of those bidding near you, but from the front you see everyones faces and smaller bidding actions in front of peoples bodies you may miss from the back. i.e you see pretty much what the auctioneer sees.

Let us know how you go.

Regards,
Marcus

[lissie]

And the result was - we got the property ! there were 2 other bidders - 1st home buyers who bid the auctioneer up to ther reserve then we out bid , and then an invester (I think) who pushed me up another few thousand. In the end we paid $1,000 more than he was prepared to pay & about $16,000 less than our top limit. The vendor was happy because he got $14,000 more than reserve - but he would have got a lot more if it had been a closed tender !

The acctual bidding was easy - but there was a lot of excitement the previous day becuase we discovered no building permits and also some $ owing on the alarm system. We got a couple of extra warranties in writing from the vendor to rectify which we signed before the auction - if we were the successful bidder. The agent we dealt with assured us this was confidential with us and the Vendor. But on my legal advice Iwas going to point both these issues out at the question time - just in case the other bidders didn't know. Fortunately the auctioneer did announce the extra warranties - the look on "our" agents face was priceless !

So in the end all are happy -

[cube]

Congratulations, and thanks for sharing your experiences with us.

Happy moving

cube

[inzvestor]

A good result Lissie !!

That $14k saving can now be used as a part-deposit towards another property !!

Thanks for keeping us updated.