Auction advice anyone?

[Jacque]

Auctions are a real mixed bag but it ultimately comes down to who's got the biggest chequebook. Alan is certainly right in that there are strategies that can be utilized to maximise the outcome but if there is one determined buyer with a budget larger than yours the game is usually up.

Depending on the crowd, the situation and my clients maximum limits (predetermined based on our appraisals of the property beforehand) results naturally vary - but I always bid confidently, position myself appropriately for maximum impact in the crowd (so I can view bidders and auctioneer/agents) and never consult my clients during the process. I like to think that I'm a pretty good reader of body language by now given my experience though some bidders are akin to cardboard cutouts

What I dislike is the bid inducing that goes on by the selling agents to bidders (called "working the room") in what is often the most highly charged emotional state of their lives- especially when they're FHB's or buying a PPOR. If you feel you're being pressured and don't wish to have the REA whispering frantically in your ear, then simply ask them to leave you alone.

 

[Experimentee]

Has anyone got advice on what the starting bid should be, if you are placing the starting bid?

Perhaps placing a high starting bid would be the best way to knock out the people who were hoping to get the ppty at the bottom of the estimated price range? Or will a low starting bid increase the chances of a lower final sale price?

 

[stevie_sloth]

I'm attending an auction this Sunday (my first where I will be a registered bidder), and was interested by the following questions I'm supposed to know the answers to...

Are you now? Good for you.
Let me ask you a couple of Q's now:
Do you know what the property is worth to within $5-10K?
With this in mind, have you set yourself an upper limit?
How many registered bidders will be there?
What is the vendor's expectation of price?
Is it in line with the current market expectations?
What other pre-auction offers have there been? How many and how much?
Why are the vendors selling?
Have you conducted pest & building reports on the property?
How many other intending purchasers have conducted pest & building reports?
How many contracts have be issued so far?
Have you looked over the contract?
Have you asked your solicitor to look over the contract?
Do you need finance to complete the sale if you win?
If so, have you had a formal valuation done?
Who is the auctioneer?
How many auctions have you seen this auctioneer conduct?
When he says "are you all finished all done?" and is about to drop the hammer, does he do it quickly or does he waver with time for you to put in another bid?
Are you planning to open the bidding?
If not, at what point do you plan to come in?
Where are you going to stand at the auction?
Will you be able to see the other bidders faces? or not?
Are you going to allow the REA's to talk to you during your bidding? or are you going to wave them away?
Are you going to bid in multiples of $1K, $5K or $10K?
At what point in the bidding are you going to change the bidding increments?
Are you going to bid after a vendor bid (if it comes to that)? or are you going to be the underbidder if it gets passed in?
This is just scratching the surface. If you do not know the answers to any one of the above, then may I suggest that you are not at all "ready to battle it out".

The ones in bold are questions I do NOT know the answer to. How could I know how many registered bidders there will be at auction?? There have been hundreds of people through the property (it's been on the market for 4 weeks, with on average, 6 open inspections per week), and while we've tried to find out as much as we can, obviously we can't know everything. The agent has advised there is one guy interested but he won't be attending the auction (this doesn't mean he won't have someone else attending for him of course) and one other woman who's an "outsider"...so...who knows really.

I don't THINK there have been any contracts submitted, but again, the agent doesn't tell us everything I'm sure.

We have not got a B&P inspection as it's a unit, and we are only 30% positive we'll actually be able to buy the property. We can't afford to spend that money if we don't get the property.

We don't know what the vendor's expectations are, as the agent is not "allowed" to say. It says in the REIQ that they cannot give a guide for auctions *groan* But we'd assume it'd be realistic with the market...but that's the other thing, we don't KNOW the value of the property to $5-$10k, as it's in an area with HUGE discrepancies in prices of property. Some are waterside, others dry, some are hideously tiny box flats, some are huge houses, some of the area is very convenient to a huge shopping centre, dining / cafe precinct and the beach, but another part of the area is far away from anything and considered somewhat "cheap"...we do have SOME idea though.

We have never seen the auctioneer (who's the agent) in action. But mark my words, if it gets to the point where he says "Are we all done?" As he says DONE, we'll be putting up our bid thingo. lol

Anyway, blah blah blah. I just wanted to say that even if you don't know EVERY SINGLE ANSWER to all the above questions, that doesn't necessarily mean you're not ready. (although having said that, we DON"T feel ready!)

 

[cu@thetop]

Let us know how you go Stevie Sloth.

 

[Propertunity]

How could I know how many registered bidders there will be at auction??

Two ways:
1. Know the agent well enough on a personal basis that they will tell you, honestly.
2. Ask how many "contracts are out" i.e. people that have asked for contracts and divide by 2.
Or ask how many people have done a strata report.

There have been hundreds of people through the property (it's been on the market for 4 weeks, with on average, 6 open inspections per week), and while we've tried to find out as much as we can, obviously we can't know everything.

You need to know everything otherwise you are in the dark.....which is OK if you don't mind stumbling around a getting a few bruises.

The agent has advised there is one guy interested but he won't be attending the auction (this doesn't mean he won't have someone else attending for him of course) and one other woman who's an "outsider"...so...who knows really.

Sounds like 1 - 2 registered bidders

I don't THINK there have been any contracts submitted, but again, the agent doesn't tell us everything I'm sure.

No, correct but imagine how much better informed you'd be if the agent did tell you

We have not got a B&P inspection as it's a unit, and we are only 30% positive we'll actually be able to buy the property. We can't afford to spend that money if we don't get the property.

You don't get a P&B with a unit but you do NEED a strata report. $200 or so and it will tell you if you are buying into trouble or not. i.e. the BC may have just raised a special levey of $10K per unit for a roof replacement......and you can't afford to pay $200 to find out? Good luck with that.

We don't know what the vendor's expectations are, as the agent is not "allowed" to say. It says in the REIQ that they cannot give a guide for auctions *groan*

I hear what you're saying but you're asking the wrong Q.
Why don't you say this instead? Mr REA I know you can't give me a price guide, I accept that. But on a completely different topic, if a unit like this was to be for sale by Private Treaty someplace, not here of course, what would you expect it to go for?

But we'd assume it'd be realistic with the market...but that's the other thing,

Never assume that a vendor's expectations will be realistic with the market.

....we don't KNOW the value of the property to $5-$10k, as it's in an area with HUGE discrepancies in prices of property. Some are waterside, others dry, some are hideously tiny box flats, some are huge houses, some of the area is very convenient to a huge shopping centre, dining / cafe precinct and the beach, but another part of the area is far away from anything and considered somewhat "cheap"...we do have SOME idea though.

Of course there are HUGE discrepancies in the types of property you've described. You need "comparable sales". Similar property comparing like with like.

We have never seen the auctioneer (who's the agent) in action. But mark my words, if it gets to the point where he says "Are we all done?" As he says DONE, we'll be putting up our bid thingo. lol

You need to know if 'done' means 'done' or it means 'pause while I seek instructions from the vendor'. Putting your bid thingo up too early can reveal your hand and leave you open to a similar attack from the side-lines.

Anyway, blah blah blah. I just wanted to say that even if you don't know EVERY SINGLE ANSWER to all the above questions, that doesn't necessarily mean you're not ready. (although having said that, we DON"T feel ready!)

Let us know how you get on.

 

[stevie_sloth]

Well, we didn't get it. It was nothing we could've done, but is still sucks.

The bidding opened at $300,000 (by one of the people the agent mentioned early on), then the agent asked for a bid of $20,000, which one other guy made...and then nothing. The agent put a vendor bid in of $350,000...then another guy said $350,000 and the agent was like, you mean $360,000? And the guy's like no, $350,000. So that was a bit of a miscommunication. Then the vendor suddenly said the bidding was at $360,000...so he did TWO vendor bids?? Isn't that illegal?

So it jumped from a legitimate potential buyer bid of $320,000 to a vendor-driven amount of $360,000, and was then passed in.

We registered (along with about 14 other people), but never got to bid, cause our absolute max price was $320,000.

So tomorrow we'll email the agent and ask how much it sold for (if it has yet), and depending what he says, we'll come back and say we submit an offer of $320,000. lol. He will laugh at us, but who cares. Then we know we've done all that we can possibly do.

We think the reserve may be $380,000 or even maybe $400,000...but who knows.

Just on the matter of comparing similar properties to try and get a more accurate price guide for this property...it really is hard. I obtained a list of all the properties in the street and also surrounding streets (and I know which block is what, like which are townhouses, which are more flat-like, which are waterfront, etc), and in the specific street of the property of this auction, only about 3 or so were bought / sold after 2000. Most were from the mid 90s and before...people hang onto them here for a LONG time, and it's VERY hard to judge how much the prices are now cause what do you really base it on?

And as well as that, the properties in the other streets in the area aren't like this property at ALL. They are totally different in layout and style. They tend to have streets here that have exclusive types of properties for each. Like Street A has ALL flats, Street B has ALL 2 storey small townhouse units, and Street B has ALL waterfront units with this particular layout (but as I said, nothing really has sold so there's no comparable data to go by)...it's very hard.