Buying well at auctions

From: Apprentice Millionaire


I have come across a property that may look interesting, and it is up for auction.

I was just wondering whether one can buy well at an auction. Obviously the answer will depend on the circumstances, but given a property, if you could buy it by private sale and negotiation or at an auction, which one would you choose?

My gut feeling is that an auction is not the best way to buy well. Comments, opinions, advice, suggestions?

Cheers
Apprentice Millionaire
(aka Jacques in the old forum)
 
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Reply: 1
From: Dave :)


AM,

I have never actually bought an IP at an auction, so I'm not an expert
here. However, I have attended many with the intention to do so. Prior
to attending, I have had the propertys independantly valued, upon
obtaining the vendors permission. I then attended on the day, with a $$
limit in mind. All the auctions I have attended have not only sold for
higher than the valuation amount, but much higher than the reserve. My
opinion is that RE agents are experts in motivating emotional decisions,
hence the reason many properties sell for very good $$ at auctions. I
still attend auctions now, for my own research purposes, but only
seriously look at buying after a property has been passed in, or is for
private sale.

That's my 10 cents worth mate.

Dave
 
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Reply: 1.1
From: Paul Zagoridis


Hi AM and DT

The main turn-off for auctions is the waste of time and money in prep and attending. Especially if your due diligence costs money (loan app. valuations, bldg & pest insp. etc). I don't spend any money before the auction.

This is a good thing in my mind as it reduces the number of investors at auctions I've attended.

Agents do however market auctions much better than private treaty. So I don't attend every auction that has a potentially good deal, I generally only go if there is sufficient "yuck" factors to scare off the punters.

I do call the day after auctions to find out if it got passed in.

I've attended 5 auctions this year and bought zero. None were even passed in to me as high bidder.

However I keep going to them. It's the only way I know to get steals. And I've found a few in my day.

I've just got to get motivated to attend a lot more auctions. If anyone has a better way to find steals, let me know.

NEAR MISS STORY: Earlier this year I was at an auction for a 1br unit in Cleveland Street Chippendale NSW. Given the location I thought it was a good buy/hold at $185K (7.0% yield), I was going to flip it if I could pick it up for $155K. It was passed in at $170K and the mortgagee would sell for less than their valuation of $197K. The Agent found someone who thought paying almost $200K for a marginal, noisy apartment was great their yield was 6.59% (0.09% to 0.59% above average... party time!)

Dreamspinner
 
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Reply: 1.1.1
From: Dave :)


So you bought it and flipped it?? Great stuff!!

...I think I need to get my head around this 'flipping' business and see
if I can make it work for me as well.

Dave
 
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Reply: 1.1.1.1
From: Paul Zagoridis


I must proof my posts better.

No I didn't buy it. The agent eventually found someone to pay too much. It was pretty good value at 180K. At 200K I could have bought much better in the area.

But it was a mortgagee in possession sale! They should have let it go, but they didn't and waited for their price. Turns out they got it. I think they were extremely lucky.

Dreamspinner
Oz Film Biz is at
http://www.healey.com.au/~paulz
 
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Reply: 1.1.1.2
From: GoAnna !


I have bought 3 properties at auction and 2 were passed in at my bid and the 3rd was a mortgagee auction with no reserve. I believe I bought well with these properties however most auctions i attend (and i am an auction addict) go an an emotionally high price and it is obvious that a number of people have gone way past their agreed limit.

Setting a limit is essential.

I have "borrowed" a posting from ninemsn property investment forum and have pasted it below. The tips may help.

In the case of an auction, I would recommend that you attend other auctions from the company marketing the property. This will familiarise you with the auctioneers methods and terminology. Believe me, you will feel more at ease if you've attended a couple of auctions before bidding at one!

Here are a few tips for bidding :
1. Look rich- even if you're not. If other buyers think you have lots of money, they may think they cant outbid you, and give up earlier. It is psychological, but can make a huge difference (particularly when bidding against 1st home buyers)

2. I generally dont start bidding until late in an auction - I like to hear an agent say that the property is "on the market". This means that it has reached reserve price and will be sold.
( I am from Victoria, so the terminology may be different interstate.)

3. A good technique is to wait until the very end when the agent is about to "knock it down" to someone else, and come in with a bid at the last second. This can crush the other buyers spirit, especially if they have just fought off another purchaser.

4.If you are bidding against another buyer, bid confidently and quickly. Dont give the impression you are nearly at your limit, bid like you are buying no matter what (even if it is your last bid). Remember if you look rich and bid aggressively you may bluff them out and secure the property for a lot less.

GoAnna !
(aka Anna before she got real)
 
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Reply: 1.1.1.2.1
From: Samantha Lind


Hi Apprentice Millionaire,
A general rule I seem to be learning is that the majority of props. at auction sell at or above their current market value - so I guess it's up to you whether you want the deal badly enough??
Sam
 
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Reply: 1.1.1.2.1.1
From: Kylie S


I am not sure I agree with this - in all cases...

I wanted to buy a prop in Brunswick some years ago - and was prepared to offer $250K b4 auction - but because it was a desirable prop - the RE said no - did not even listen to what I was prepared to offer. (This particular RE was an arrogant man!)

At the auction there were about 150 people - with several "Real" bidders. By this time I had changed my mind and decided not to bid.

Prop got passed in at $235K

Kylie
 
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Reply: 1.1.1.2.1.1.1
From: Apprentice Millionaire


Thank you all for your comments. I keep learning!

One thing I have learned is that this property is also so well presented, and, as Michael alluded to, in a strong market, it would sell at a premium. So I have decided not to bid.

Cheers
Apprentice Millionaire
(aka Jacques in the old forum)
 
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Reply: 1.1.1.2.2
From: Gee Cee Cee


I agree with Anna's points.

I am a Auction JUNKIE.

I just attend to see what is happening .
I like to start low. If the auctioneer goes $300k to start I will LOUDLY bid $200k.

I bid up to a point then if I am not serious I just drop out.

I have bought a number of properties at mortagee auctions where I have made absolute ridiculous bids and then had them accepted.

RE:( 4 units for $96k)

However that was when property was not the dream of the day.
Auctions that I have attended of late have gone through the roof.

I am a counter cycle investor.

Therefore I will just sit on the fence and swoop again at some time in the future
when everyone just hates property.

(Just my old conservative views again)

Gee Cee

The unemployed Bum.
 
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Reply: 1.1.1.2.1.1.2
From: Gee Cee Cee


Well Said Mr Croft

Regards


Gee Cee
 
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Reply: 1.1.1.2.1.1.1.1
From: Gee Cee Cee


Go along. Start the bidding LOW. Then pull out at YOUR LIMIT.

This will build your confidence & reduce nerves for when the REAL action starts.


IE: When you are Really out there to snag a bargain.

Play it like a game.

Gee Cee
 
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Reply: 1.1.1.2.1.1.1.2
From: Apprentice Millionaire


Salut Michael,

You didn't put me off bidding: I did my homework :) And I take on board your and Gee Cee's comments about learning when going to auctions. I have only attended a handful to date: so I need to be out there more.

Cheers
Apprentice Millionaire
(aka Jacques in the old forum)
 
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Reply: 1.1.1.2.2.1
From: Sergey Golovin


Oh yes, I like that Gee Cee.
Tell’m loud different prise range from what they biding on. But I think you have to be very bold. I do not know if I can do it, but I like it.

I used to go to lots of car actions in my earlier days.
Never bought anything from them during the actual action.
But I was there so regular that auctioneers knew my face very well. And I think they were a bit nervous to see me. I have never said anything, never bid for anything, and never asked for anything. I just watched quietly.
They may be thought that I am government agent observing the bidding process?

When the time eventually came to buy what I wanted I bought after the action, the car that has passed in. I knew exactly what I wanted, so I waited.

They sold it to me with pleasure. May be partially just to get rid of me? I do not know. When I asked for better price they gave to me as well.

I guess it is just a different technic. Takes lots of time though. But very interesting. They have dummy biders as well...

Serge G.
 
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Reply: 1.1.1.2.2.1.1
From: Robert Longmore


Another little trick car dealers use at auctions, especially against "wood ducks" (normal people, not buying for a dealership)

If the bidding is increasing in , lets say bidding is starting at $100,000 and going up in 10,000 lots, jump in and bid 110,595. throw in all sorts of odd numbers, and as said before, call out the full amount of your bid, eg $110,595. this has the same effect as mentioned above, it will scare beginners with the "large" sum of money offered, and the real benefit is that it slows the auction down an incredible amount. People (beginners) will start bidding in $100 lots instead of $10,000, doesnt usually work against 'professionals'

A very unusual bid like the one mentioned will also get you plenty of strange looks, and if you look the part, all the better.
 
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