Whether to make first bid or not?

[ourhouse]

Take this scenario
Say the value of the property seems to be $320-330K based on recent comparable sales
A buyer Mr.X has intelligence that the response to the auction is going to be lacklusture. Say 3 parties turn up to the auction. The auction starts with the declaration of the reserve price to be $310K, no one bids. A vendor bid is made at $309K. Now at that instance

1. Shall Mr.X make the first bid for $310K
2. Or simply wait for it to pass in and negotiate it down through private sale

If Mr.X does #1 and no other party bids and it goes sold to him, does it mean Mr.X bought it expensive and could have bought for $295K after passing in.

 

[wylie]

If I thought it was worth $320K to $330K and I could buy it that day for $310K I would probably bid.

If there are three people waiting for the house to pass in so they can negotiate, the price could easily go over $310K in the scramble to "get it cheap".

 

[Big Will]

Bid if you see value in it, as the person whoever is the last person to bid when passed in has the first right of refusal if it didnt reach resevere. I have never been to an auction when they declared what the reserve price is, to me this wouldn't work.

I was the only person to bid at auction one time and it got passed in even after the vendor bids kept going, since i was the only one that bidded I had the first right of refusal. Be the last person to bid and dont bid above what you are willing to pay.

The other strategy is do go hard or go home, went to an auction quoting 360k+ and the first opening bid was 420k (I thought value was 430k-440k) there was heaps of people and he potentially scared off alot of buyers with a large opening bid, as everyone gasped. It ended up selling for 465k, due to so much interest. I have heard stories where people just dont feel like bidding against a hard playing bidder cause they get frustrated and give up saying 'whats the point he will just keep bidding'.

Pick something you are comfortable with, but I would strongly advise not sitting on the fence even if it is going to be passed in as sometimes there is still a little mini auction that takes place afterwards or they will be talking to each of the 3 parties (using your example) seperatley and you will not know what each person is bidding or telling the agent.

Good luck!

 

[travelbug]

As mentioned you will not know what the reserve is. The agent may give a guide price but even they don't know the reserve until the beginning of the auction. Agents can be WAY out (usually lower).

I don't like coming in first as then the pressure is on you. If there are other bidders I let them go at it until it looks like it's ending. Then if it's still in my range I'll bid. Many a time I'll not even bid as it goes beyond my buy price.

The last bidder gets first chance is a courtesy not a rule. But if you have a price in mind and no-one else has bid I would put a bid in. Sometimes if there are no bidders the seller will negotiate a lower than reserve price rather than start the sale campaign again (a bird in the hand and all that!). If the value is $320K-330K I would not bid $310K. That's not a bargain. Maybe $290K or less? If you're the only one that put your hand up you never know.

 

[wylie]

If I thought it was worth $320K to $330K and I could buy it that day for $310K I would probably bid.

If there are three people waiting for the house to pass in so they can negotiate, the price could easily go over $310K in the scramble to "get it cheap".

As mentioned you will not know what the reserve is. The agent may give a guide price but even they don't know the reserve until the beginning of the auction. Agents can be WAY out (usually lower).

If the value is $320K-330K I would not bid $310K. That's not a bargain. Maybe $290K or less? If you're the only one that put your hand up you never know.

It wasn't until I read travelbug's post that I realised that my post was missing a vital bit of information. That is, there is no way that you will know it is "on the market" until the auctioneer reaches the reserve. So, as travelbug rightly points out, you would not start at $310K but would put your first bid in at whatever price you desire.

If you see value at $320K to $330K and your bid of (say) $290K is countered by a vendor bid and the auctioneer then says "the house is on the market" you will know that anything over that will win.

The other likely scenario is that the auctioneer will pass it in with a vendor bid and not give anybody a chance to bid further.

 

[ourhouse]

Thanks for comments everyone

 

[Jtkumnick]

"The auction starts with the declaration of the reserve price to be $310K"

ummm how does this happen? seems to defeat the purpose of an auction?

love to be that auctioneer:
"Right people the owners will take $310k. Any Takers? No, well I'll pass it in- im off to the pub. That will be $550 please."

sign me up.

 

[Ed Barton]

"The auction starts with the declaration of the reserve price to be $310K"

ummm how does this happen? seems to defeat the purpose of an auction?

love to be that auctioneer:
"Right people the owners will take $310k. Any Takers? No, well I'll pass it in- im off to the pub. That will be $550 please."

sign me up.

I think there might have been misunderstanding on behalf of the OP. The reserve is never announced up front.

to the OPs question - whether to make the first bid?

In my experience in Brisbane, a non auction state, the first bid never wins the auction. In Brisbane 'winning' the auction doesn't normally buying the property but being the highest bidder.