Auction Strategy | 5 Mistakes First-Time Bidders Make

By Rich Harvey, CEO, propertybuyer.com.au

I’ve attended hundreds of auctions and seen plenty of crazy bidding strategies. Auction bidding can be exhilarating, but first-timers often feel overwhelmed. While experienced bidders may appear calm, the reality is that auction nerves are common. Keeping your emotions in check is hard in the pressure cooker environment of a property auction! 

To ensure your first auction experience is a success, avoid these common pitfalls. Let's master your auction bidding strategy together.

1 – Failing to prepare

In the heat of competition, even the most reasonable individuals can make rash decisions. If you find yourself as one of the final bidders nearing the end of an auction, you’ll likely experience an adrenaline rush and a quickened heart rate, accompanied by a frantic internal monologue: “What do I do now?!” 

This is not the time to decide your absolute upper price limit. 

Smart buyers determine their limits well before the auctioneer calls everyone together. Preparation is key. Here are some steps to take: 

• Do Your Sums Well in Advance: Understand what you can afford to borrow and the property's value. Calculate your budget thoroughly. 
  
• Set Your Maximum Bid: At least a day before the auction, have a detailed discussion with any significant other about the maximum amount you’re willing to pay. This figure should be your “pain point” – the absolute limit where even one dollar more is too much. 
• Mental Preparedness: Be prepared for the possibility that you might be outbid – and that’s perfectly fine. There will always be other properties, and each auction is a learning experience. 
  
• Role play on Mental-Muscle Memory: Tackling these tough questions in advance will allow you to rely on your preparation and mental-muscle memory when the time is ripe. 

Understanding how to bid at an auction involves preparation, clear budget setting, and mental readiness for various outcomes. By preparing thoroughly, you can navigate the auction process with confidence and clarity. 

2 – Not Knowing the Rules 

It's crucial to be well-versed in your state or territory’s rules relating to auctions. Understanding auction tactics can make a significant difference in your bidding success. Here are some key points to consider: 

• Pre-Auction Requirements: In many states, including New South Wales, bidders must register before participating. This often involves producing identification and providing other details. Arriving late and trying to bid without registering is not allowed. 
  
• Understanding Auction Terms: Know when the property has reached its reserve price and is “on the market.” Familiarise yourself with what happens if the property passes in. In many jurisdictions, the underbidder doesn’t automatically have the first right of refusal. 
• Seller’s Specific Requirements: Be aware of the seller's expectations regarding the deposit and settlement period. Understanding these specifics can help you tailor your bid to meet the seller’s needs. 
  
• Legislative Rules: Learn the legislative rules of auction in your area. This includes understanding bidding increments, auctioneer’s announcements, and any cooling-off periods that might apply. 

The best advice here is two-fold: 

• Attend Auctions: Before you bid, attend plenty of auctions to observe how different scenarios play out. This firsthand experience is invaluable. 

• Talk to Agents and Auctioneers: Engage with the agents and auctioneers, especially those selling your desired property. They can answer questions and provide guidance well before the auction. 

 3 – Standing Back 

When the moment arrives, it’s best to position yourself front and centre and make sure you're heard. The auctioneer must know you’re a serious contender and that you’re there to win. 

Some believe in the strategy of hanging back to make a “knockout bid” towards the end, but this can be risky for novice bidders. This approach can give other bidders time to build their confidence and may result in your "knockout" bid being significantly higher than necessary, leading to overpayment. 

Consider whether you want to open the bidding and, if so, what your initial offer will be. Most sellers expect a first offer below the reserve price. However, starting too low might elicit a withering comment from the auctioneer, which can undermine your confidence. 

As with determining your upper limit, think about when you'll enter the bidding process. Strategic entry can help you manage the competition more effectively. 

4 – Believing the Auctioneer Holds All the Cards 

First-time bidders might be surprised to learn that the auctioneer and selling agent are the ones under the most pressure during an auction. The auctioneer's goal is to secure the highest possible price for the vendor, making them beholden to the bidders present. 

If agents rush you for quick decisions or push for a fast counter bid, take a moment to think. If they believe you’re likely to increase your bid, they will wait for your decision. This is the time to employ your well-practiced poker face. Don’t let them see you’re stressed—relax and let them feel the pressure instead. 

While it’s important to be respectful of the process, it’s perfectly acceptable to ask for a moment to gather your thoughts. In some cases, bidders have even stepped out to make a phone call, with agents in pursuit. While this can be dramatic to witness, it’s not always the best strategy. 

Ultimately, run your own race, not the auctioneer’s. 

5 – Unquestionable Compliance on Increments 

Just because an auctioneer requests a specific bidding increment doesn’t mean you have to comply. Auctions can come down to small margins. I’ve seen bids reduced to $100 increments, which can be excruciating for the crowd but result in significant savings for the buyer. 

Auctioneers will try to dictate your bid margin and may even reject smaller increments in the early stages of an auction. However, they often become more flexible as bidder numbers thin out. 

Don’t get swayed by suggestions of a “knockout” bid. While there are moments when a significant bid can show deep pockets, it’s important to keep your enthusiasm in check. Remember, everyone, including your competition, has their limits. The best strategy is to stay one step ahead until the hammer falls. 

Bidding at an auction can be daunting, but experience builds confidence. At Propertybuyer, we are exceptionally well-positioned to alleviate your stress by guiding you through the auction preparation process and even bidding on your behalf. Explore our property auction bidding services and leverage our expertise so that your biggest concern on auction day is choosing the brand of champagne to celebrate your successful bid. 

By understanding the auction rules in NSW, VIC and QLD and employing effective auction tactics, you can approach the auction process with confidence and a strategic edge. Win your dream property with Propertybuyer 

Propertybuyer: Your Trusted Auction Partner 

At Propertybuyer, Australia's leading buyer's agency, we empower property seekers to achieve exceptional results at auction. With a team of experienced and qualified buyers' agents across the country, we provide comprehensive guidance and support throughout the entire auction process.