Looking at gaining an edge bidding on real estate auctions? We interviewed Three-time REB Australian Auctioneer of the Year Winner James Pratt for his best advice. Here are James’s top eight strategies to win property at auction.
1) Ask the questions
Before auction day, ask the broker how many building reports have been issued on the home and how many contracts have been sent out, another great question to ask is, How many offers have come on?
This information gives you a much more realistic idea of the level of interest on the home, so you don’t have to guess by the number of people attending the open houses.
2) Make an offer before auction day.
If you like the property, make a strong offer before auction day. Over the last 12 months, areas such as New York City and Los Angeles have experienced increases up to 35% of auction homes selling beforehand.
3) Have a game plan
Auctions are much easier if you have a game plan when you arrive.
It’s a good idea to research the local area, including recent sales and comparable listings also available. Before auction day ask the agent who the auctioneer is and see if they have any auction you can watch (This gives you a clearer idea of the auctioneer style and pace your auction will be like).
Included in this advice is give yourself a limit on how much you will spend and if the auction goes above this amount, then it’s okay to walk away. Remember to bid with your head, not emotions.
4) Start big and blow your competition out of the water
When the auctioneer calls for an opening bid, rather than sitting back and waiting for someone else to open the bidding, start the bidding with a knock-out bid. This may take out some of your competition and also establishes you as the leader of the pack. Psychologically you’re setting the pace now when you start.
5) Use your poker face and be confident at the auction.
Couples buying the next family home tend to show a lot more emotion than investors, who are less emotionally attached. If you reveal too much, other buyers will find it easier to bid against you, and the auctioneer will read your body language.
6) Use your agent to assist you
If your English is not perfect, it’s okay to ask the agent to write down the price as the auctioneer calls the bid. This gives you extra time to gather your thoughts and keep your emotions under control while taking better control of the auction.
7) Challenge the auctioneer
If the bidding is going up in rises of 25, rather than putting in a lower amount to slow down the auction down (e.g., $10,000k), it’s more effective to put in an uneven increase bid such as $77,500. This will slow down the auction as the auctioneer will have to rethink his bids. It will also disrupt the flow of the auction giving more control to the buyers rather than allowing the auctioneer to have so much control.
8) Make sure you have the first right to negotiate.
If a property doesn’t reach the reserve price, don’t despair. As a courtesy, the majority of real estate offices offer the highest bidder the first right to negotiate and put in an offer after the auction when a property is passed in, this is a big advantage in luxury markets where the auction clearance rates are consistently high and there are often multiple interested parties.
About James Pratt
James Pratt is the founder and CEO of the James Pratt Auctions Group and Three-time REB Australian Auctioneer of the Year Winner. In his career James has sold over 12BillionDollars’ worth of Real Estate via auction around the world and was the first person in the world to sell Real Estate via Live auction using Crypto Currency.
At present James sits on numerous advisory boards and is based internationally for selling luxury homes.