Winning and Losing at auctions – By William de Ora (de Silva)
Ria at the auction “This is the first time we’ve been to an auction. It would have been so daunting if we were on our own”
Just over two months ago, out of the blue Sunila called me. At that first phone call I didn’t know who she was or why she was calling me. One of her friends has given my name. Without even introducing herself Sunila launched into what was on top of her mind.
“We are losing out at auctions” there was desperation in her voice. “A friend said you would be good to bid for us.” There was no room for me get a word in. “Are you available tomorrow? The auction is at 2.30pm?”
As a buyer’s agent I get asked to bid at auctions or negotiate with real estate agents on behalf of clients.
Why people like Sunila and Rohan keep losing out at auctions is because they are up against professionals. The auctioneer is a hired professional, there to work with the team of selling agents on the day to get every dollar they can out of your pocket. They do this day after day. In comparison Sunila and Rohan are pure amateurs.
Auctions are highly emotional environments, and not the best environment for buying a major asset in. You could be out of your depth if you haven’t successfully bid at auction recently or indeed never before.
During this initial phone conversation I managed to gather why they were loosing out at auctions.
Bidding at auction is like a game. It’s not just about getting the highest price, there is a psychological battle taking place. All good sporting teams have done countless hours of practice and have a game plan before they go into the field.
At the end, there are winners and losers. And, you don’t want to be on the loosing side. At auctions there’s two types of losers. There’s Sunila and Rohan who leaves the auctions empty handed. Other losers end up paying far more than what they should.
Sunila’s and Rohan’s game plan was just turning up with a price limit in mind and calling out some numbers. They didn’t realise there is actually a lot more strategy, endurance and psychological game play involved.
Sunila and Rohan would stand at the outer perimeter of the auction. Never knowing when to bid or how to bid. They would have been fearful even to put their hand up to bid.
When there is a momentum, where the auctioneer’s role is to get that buyer to continue bidding. Without a game plan Sunila and Rohan weren’t able to act quickly and make fast decisions. Think of like this, even if you weren’t successful by attending auctions will help you in the future as to identify what to do and what not to.
However, Sunila and Rohan resented putting time into attending open houses and auctions because they felt they were neglecting the kids. Instead they wanted to spend Saturdays with their kids. From parent’s perspective this is understandable.
There is another way to bid at auctions. That is to hire someone who has the expertise with auctions. A buyer’s agent. This is what, another client of mine Ria and Kamal did.
ANOTHER WAY TO BID AT AUCTION
“Yesterday I experienced my first auction. I had mixed emotions driving to the property. I was nervous. A little curious. And, in a strange kind of way excited.” Ria said.
Ria and Kamal is a young couple who has embarked on building their property portfolio. Unlike most young people Kamal had the good sense to ask for help. Ria says, “At the beginning I was against having a buyer’s agent. I said we should save the money by doing all by ourselves.”
One of the properties I was recommending in Rooty Hill NSW was going under the hammer. I was bidding on behalf of Ria and Kamal.
“We pulled in front of the house. There were tents, banners, cameraperson; even a drone with camera on it’s under belly. Instead of an auction, this quite street in Rooty Hill had turned into a mini circus” Ria described her first auction experience.
The first clients I mentioned, Sunila and Rohan often say auctioneers intimidate them. The whole auction process is designed to get the adrenaline going and ending up far more than what the property is worth.
Personally I never like auctions. Typically I would negotiate a price and purchase the property prior to the auction. The reason I don’t like auctions is because it’s a place people put their hands up to say “pick me, pick me, I want to pay more.” Then they end up paying unrealistic prices. Only people, in most cases end up winning are the vendor and the agent. Not you.
The circus atmosphere Ria is describing is simply to disarm the unsuspecting buyers. They get lulled into a false sense of gayety, theatrics. For an inexperience buyer then you need to learn to step over carefully over the auction minefield. If you were to make a mistake or two it can cost you an arm and a leg.
At the end of this chapter I will out line seven basic tips that will not only help ensure your real estate dream doesn’t turn into a nightmare, it could mean you walk away having saved thousands of dollars.
“This is the first time we’ve been to an auction. It would have been so daunting if we were on our own” Ria smiled,
Sunila and Rohan’s approach is world apart from Ria and Kamal. The later couple knew they need help. They didn’t wait until the eleventh hour.
It’s only human to be concerned about failing. No one wants to lose their hard-earned money on a risky venture. Sunila and Rohan’s fear is very real to them. And I am honoured that Sunila trusts me enough to call on a Sunday morning and tell me how she’s feeling.
She poured her heart out. That is difficult for most individuals, especially for immigrants from the Indian subcontinent. We are proud people. Showing our vulnerable side is not something we do in public.
Gavin Larkin, my friend and the founder of “R U OK?,” told me on his deathbed: “William, 95% of things we worry about never come to fruition.” I didn’t repeat Gavin’s words to Sunila, though they came to mind at the time.
Literally, my clients who are from the Indian subcontinant are alone in this country. They no longer have the support network they had back home. Their extended family is gone along with their old familiar community. Australia feels like a world apart. Sunila knew any mistakes she and her husband made, they would have to manage on their own. That awareness made her feel vulnerable, and added to the understandable fear she felt as a new investor. So the thought of not having tenants or getting taken for a ride was frightening, even if the fear was unfounded. I understand. I’ve been there.
Buying a property at an auction is not something you do everyday. So, being fearful is perfectly normal.
SEVEN TIPS TO HELP YOU AT AN AUCTION
Here are seven tips you need to watch when you are going into an auction.
1 – Get a lawyer to review the contract before the auction. If you’re the successful bidder you are bound by the contract. There is no cooling off period for auctions. On the day of the auction read the addendum sheet on the day of the auction as this reveals any mistakes or changes
2 – Sort out your finance in advance. You only have limited number of days after the hammer falls to pay the balance of the bid. You’ll also need insurance lined up since you become liable for any damage to the property as soon as your bid is accepted.
3 – Don’t believe everything the real estate agent say. They will say what you want to hear. Do your own due diligence.
4 – If it’s not a knockdown and rebuild, then, know exactly what you are buying. Get a pest, building and (if required) strata reports. If the building is old then it’s worth investing in a structural survey to check for hidden problems before you bid at auction.
5 – If the property seems a bargain, there’s probably a good reason. It’s worth a visit to the council to check on if road widening or a possible freeway flyover affects the property. Or, if it’s within a flood zone
6 – At the auction, agree on the maximum you’re prepared to pay and stick to it, because the auctions get the adrenaline going and sometimes difficult to keep the emotions in check as a buyer. Stick to the price you agree, not a dollar more. Be disciplined.
7 – During the auction, you will see the agents running between bidders, nudging you to raise the bid. It’s understandable as they act for the seller to highest possible price. Don’t be intimidated. They are simply doing their job, so decline their assistance. After all, you are capable of making your own mind up. Stay in control.
This property at Rooty Hill eventually got sold for $715,000. Far more than what we wanted to pay.
“I saw for the first time how the auctioneers could rattle and bully people.” Ria said. “What a good buyer’s agent can bring is unemotional sound judgment” was Kamal’s take as we headed back to our respective cars.
As a buyer’s agents can help their client’s to save time, money and daunting experience in buying at auctions. Or, not if the prices are unrealistic. Lessening their chances of making an ill-informed investment decision. In doing so, they make thousands upon thousands of dollars difference.
If you are looking to buy a property — then please give me an obligation-free call on 0414 834 733.
William de Ora (de Silva)
Buyer’s Agent, Construction Coordinator, Best Selling Author
M: 0414 834 733