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How to negotiate at auctions

By Michael McMahon

There are usually two responses to this scenario: ‘bring it on’ or ‘I think I feel queasy’.

But there is, occasionally, a third approach. It’s where a buyer decides they can outwit everyone else and they’re going to play by their rules. Unfortunately, it usually doesn’t end well.

Let me give you an example. The other day, I was bidding at an auction on behalf of a client. Their luck was in because there were few competing bidders. The auctioneer advised that the reserve had not been reached and the property was to be passed in. Crucially, I had provided the last bid and, as is custom in these circumstances, the property was passed into me. In short, the auctioneer was giving me the first and exclusive opportunity to negotiate a deal with the reserve price as the starting point.

In I went and 10 minutes later I walked out again with the agent and my jubilant client, having negotiated a price somewhere between my last bid in the auction and the reserve price. Every party was happy.

Alas, at this point a gentleman strode up to the agent and asked to put an offer in.

“Sorry sir, the property’s sold, “said the agent, and told him the price.

“But I can offer you $5,000 more,” said the crestfallen man (who didn’t bid at the auction).

“Unfortunately you’re too late. Sorry,” said the agent and we all tip-toed away as the man scratched his head.

This was an example of someone either being too clever by half or being ignorant of the rules of the game.

Don’t lose your dream home by trying to outwit at an auction

He had the budget and opportunity to secure a property in an open and transparent auction environment, but he chose not to lift his hand. Instead, he gave up any power he might have had by allowing me to lodge the last bid before the property was passed in and so negotiate exclusively with the vendor’s agent.

The golden rule of auction bidding is always be holding the final bid when a property is passed in. If you want that property, the risks attached to allowing someone else have this prized position are too great.

The example I cite above isn’t unique. I have seen anxious under bidders hovering outside a property whilst negotiations are going on inside.

A fatal mistake buyers make is to treat the auctioneer as their enemy. They do this by being contrary, awkward or even rude. You’ve seen it: weird bidding styles; standing ominously close to the auctioneer, inconsistent and irregular rises in the bid; and interjecting the bid flow with questions. It’s as if they are trying to psych the auctioneer out – which is rather a silly approach, given that the auctioneer has probably presided over more auctions than the bidder has had hot meals. Rest assured, the auctioneer knows the game far better than you do!

Moreover, it’s a completely counter-productive activity and may be costly to your goals.

Always treat your auctioneer with respect. Your competition are the other bidders, not the agent or the auctioneer. And the only way you can hope to win over them is to know your market, know what represents a fair price, and to come to the battle with a realistic budget and a courteous demeanour

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