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  • Writer's pictureMenck White Auctioneers

How to bid at a real estate auction and win

For many home buyers auction day is a nervous one, as they try to compete against other buyers to secure their dream home. Most buyers turn up without a plan or a strategy but it is very often the bidder working with a clear plan in mind who ends up securing the property.

Multi-award winning real estate auctioneer Clarence White of Menck White Auctioneers is a five time winner of Real Estate Institute of NSW Award for Excellence and one of Australia's leading real estate auctioneers. In this blog he unpacks a number of different bidding strategies designed to help you successfully secure the home and win on auction day.

"The first and most important thing is that you need to bid. Not bidding and hoping you will magically own the home is an entirely self-defeating approach. My advice is try and be the opening bidder if you can because this allows you to control at what level the bidding starts. The level at which you open the bidding will determine how much you find out about the other competitors bidding at the auction and how much they have to spend."

By starting the bidding at a moderately low level you will discover how many other interested parties there are and what strength they have in the auction because they will all feel encouraged to join in by the low starting level. This can be a useful strategy if you are unsure as to the level of competition that exists on the home. It's important not to try to start the bidding at a ridiculously low level though because any good auctioneer will refuse to accept that opening bid. (The auctioneer can refuse any bid they believe is not in the best interests of their vendor.) So if offering a low start make it only moderately low and still within reason.

Conversely, if you know you are competing with a large number of bidders, then sometimes a strong opening bid can be a powerful play because it scares many of the bidders off from bidding. Clarence suggests bidding with confidence and limited hesitation throughout the auction is also key to success.

"The reality is, confident bidders who are determined to buy the home usually end up being the purchaser. If you think about the psychological game of the auction, the message that you send to other competitors by bidding quickly without hesitation is 'no matter what you do, I am going to bid again and I am going to buy the home'. This can save you money at the back end of the auction because when confronted with an assertive bidder who seems to have an unlimited budget, many other buyers just give up believing that no matter what they do they are going to get out-bid. The trick is to cause your competitors to stop bidding before they reach their maximum budget and in this way you have saved yourself money."

Another key consideration when buying property at auction is to ensure that you are the highest bidder if the property looks set to pass in. (If a property fails to meet the owners reserve price ie the minimum price at which the owners will sell it, it is said to be "passed in".) The reason it is imperative to be the highest bidder in this situation is because typically the agent and auctioneer will take the highest bidder inside after the auction passes in and the highest bidder will have the first chance to negotiate on the property and the first chance to buy the property at the reserve price. In many cases a deal is struck with the highest bidder immediately after the auction and other bidders don't even get a chance to have further negotiations. So it is essential to ensure you are the highest bidder so you are in the best position to negotiate with the vendor after the auction. If not you could easily miss out even though you might have been willing to pay more. The auction process rewards those who are willing to put their hand up and bid in this way.

"If you are the underbidder, you are likely to be left out in the front yard while the highest bidder is taken inside, and 9 times out of 10 the deal is done immediately in that negotiation with no further opportunity for the underbidders. "

Clarence also says to think carefully about the increments in which you are bidding throughout the auction.

"Bidding in small increments such as one and two thousand dollars can be a false economy because those bids tend to send the signal to other people on the auction floor that you may be nearing the end of your budget. And that can tend to encourage other bidders to keep on bidding, even if they are exceeding their own budget, because they believe they are close to securing the home."

To hear all of Clarence's tips on how to bid at a real estate auction and win, watch the video attached here in this blog.


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