Fortune favours the brave. It’s an expression I’ve used a few times over the years. But I have referred to this a bit recently as I’ve found a few buyers of late seem to have a limited understanding of auction and subsequently are turning up yet planning on not participating.
However by not bidding and letting the property pass in this has only led to a far more competitive and uncomfortable situation straight after the auction as they enter a closed door negotiation or what is commonly referred to as a dutch auction. These negotiations see all buyer’s given one chance to submit their best offer without any idea of their competitors price or even the number of other offers.
Surely to have transparency would be better. At an auction the transparency allows buyers the vision to see their competition. But it can also offer greater benefits to the buyer. They are dealing with a more motivated seller, think about it, would you be more or less motivated during your auction? There is no paper work, other than registering, until you have bought the property. Finally there is no one filtering your words, no one saying this is your best offer or just a cheeky offer. You simply stand on the property and call your price out.
It really amazes me when people turn up to an auction with a pre-approval from the bank, have inspected the property a number of times and have a game to buy the property that falls into line with “I’m not bidding, I’m just gonna watch and see”.
Mostly these buyers are just ignorant about auctions. They are nervous about the unknown and don’t want to pay to much. But usually it only takes a minute to remind them of the reasons as to why they should participate, all in line with what I’ve listed above and they usually warm into the bidding.
So therefore my criticism is aimed at the agents. Are we as an industry educating people about the process of auction? Is your agent familiar enough with auctions that they know what the buyers don’t? Are they telling buyers that a cash contract doesn’t mean you need cash? That no building inspection doesn’t mean you can’t conduct a building inspection prior to bidding. That you can often pay less than a 10% deposit and settle longer than 30 days. Auctions are not set in stone, the terms can be altered if agreed.
Anything that is new is likely foreign and when it involves a public event it can bring nerves too. But to not turn up or not bid purely because you are not informed, could be a costly and a very uncomfortable mistake. My recommendation to any buyer is attend a few auctions, see what happens and start to watch how the successful buyers bid. Then get comfortable with prices. Attend open house, write down the prices from any auctions and work with your loan broker to establish the price you feel comfortable paying for a property. Then once you know your limits and you know the values it is now just down to your strategy. To hope a property passes in is not a plan, hope is for the hopeless, be brave instead.
