While auctions are somewhat unpredictable, it’s nevertheless important to be prepared to avoid overbidding in the heat of the moment.
Auctions are typically high-pressure environments where clever auctioneers use techniques to encourage big spending. To help you land your desired property at a price you’re comfortable with, here is our advice on the best way to bid at auction.
Do your research
If you’ve never experienced an auction before, it’s a good idea to try to attend a few to get the feel for them before you plan to bid. There are certain protocols specific to auctions and you will feel much more comfortable if you already know what to expect.
During the research stage, carefully review the contract and ensure your finance is in order so you can write a deposit cheque on the day.
Ensure you have researched the price of similar properties in the area and set yourself a maximum price that you would be comfortable with paying, taking depreciation deductions into consideration.
Depreciation makes owning an investment property much more affordable. Use the BMT Tax Depreciation Calculator to see the likely deductions claimable on the property before deciding on your walk-away price.
It’s a good idea to take advantage of PropCalc, an innovative tool which calculates the real costs of owning an investment property based on its specifications.
You can also find investor case studies on our website for various property types and price points to show you how depreciation improves investors’ cash flow in different scenarios.
Slow the pace on auction day
Auctioneers want their auctions to remain at a fast pace to increase the sense of urgency, putting pressure on bidders to place bids. In these situations, it can be easy to bid higher than you had planned to in order to avoid missing out on the property.
Slowing the pace of the auction will disrupt the auction’s momentum and give you a fraction more time to consider your bids.
A technique used the slow the pace of an auction is to bid in odd increments. Auctioneers try to increase bids in even increments as they are simple to calculate and allow auctioneers to retain the auction’s speed. Bidding in odd increments will cause the auctioneer to slow the pace and subsequently, take the pressure off bidders to place urgent bids.
As important as it is to show your competition you mean business by standing tall and confidently placing bids, it is equally important to watch your rival bidders’ body language.
If rivals are chatting amongst themselves or hesitating, it’s a good sign your competition are reaching their upper limit. Try to counterbid quickly and confidently to show your competition that you are prepared to top whatever they throw at the auctioneer.
Read some of our recent blog posts:
Image Source: Collins Home Loans