Looking at my first auction in a couple of weeks and had a question about this tactic - I agree with it, but what happens when the property is passed in?
For example, other people are bidding, and you know that the reserve has not been met. The property is passed in, and the highest bidding has first option to negotiate.
What position does this leave you in? Say it passes in for $500k, and agreement is reached for $520k. If I was willing to bid up to $550k once the property was on the market, have I completely missed my chance?
If it was me I would bid until it went to 550k that way you know you are out, otherwise it becomes a silent auction and you wont know what the other person is bidding/offering. They might only go to 530k and yet you put down 550k and win meaning you paid up to 19k more than you had to....
Or it could be the other way of you put down 548k and they put down 549k meaning you missed out by 1k but could have gone to your highest and won for another 2k.
I would rather bid to 550k and win than put an offer of 550k and win, the agent will always say you only just beat the other person. After all if an agent said you paid $20k more than the other person you will feel pissed off. It is one of the lessons I learnt when I was a REA the only person who doesn't know how much more they paid than other offers is the winning person.
Using your example as an example lets pretend 3 offers came in
Vendor & REA know as they know all the offers and can see a difference (Offer 1 - 550k, Offer 2 - 530k, Offer 3 - 500k)
Buyer (offer 1) only knows their offer and are told 'you just beat the other person' as they will be annoyed saying you paid 20k more than offer 2 and 50k more than offer 3.
The under bidders knows how much the property sold for and what their offer was so know they were beaten by (offer 2 beaten by - 20k, offer 3 beaten by - 50k)
The vendor is ecstatic having 20k more than the next highest but the buyer, who could become a future vendor will never know the good job the REA did. Cause if they did will get angry and never use the REA when they list as they felt ripped off and would rather an agent that did hard negotiating and apparently only just beat the competition by a couple of $1,000s.