As a real estate investor, you go to a house auction in hopes of finding bargains. But with auction season in its peak time, it’s essential to know how to win a property auction as you will be up against some competition. Besides the competition, property sellers have the upper hand in some cases, especially if their properties offer something unique. This is also true if a good auctioneer has the room.
In addition to this, the stakes are high and you are likely operating out of your comfort zone. Buying property at an auction can be stressful. That is why you should never go into a real estate auction unprepared and you should try to learn how to win a house auction before participating in one.
Here are 7 tips on how to win a bidding war at your next house auction.
7 Real Estate Auction Tips
Tip #1 – Look the Part
First impressions matter here. How you present yourself to other bidders can give you leverage and an advantage. If your image screams professional real estate investor, others may be less willing to bid against you on a real estate investment property. The goal here is to play on the nerves of auction novices. The intimidation factor will help you achieve that goal.
Come dressed for business and bring a notebook with you. When you write notes, you come across as a professional who knows something others don’t. Moreover, when you dress professionally, you will improve your confidence, which you will need to make the right choices when it’s time to start bidding.
Tip #2 – Make a Good First Impression
Now that we got the look down, it’s time to focus on your act. Don’t be shy of getting noticed. The way you carry yourself ensures that everyone in the room knows you are present and ready to win.
For example, when you enter, make sure to choose the best location. You will want to be seated at the front because this will show others that you take the auction seriously. Alternatively, you could stay standing. This will ultimately make you stand out from the crowd. When you speak, speak confidently and state the entire amount. Say “$500,000” instead of “500” as it creates more of an impression.
Tip #3 – Keep Some Things to Yourself
The more information a seller knows about you, the larger the advantage they have over you. Don’t disclose how much you can actually bid or how much you are willing to pay. You should give off the impression that you have the money to buy the property of your choice. You should also show that you are knowledgeable and know how much the property is worth, even if you, in fact, don’t.
Keep in mind that auctioneers and sellers’ real estate agents want to drive the bids up because they receive higher commissions when they do so. If they know how much you are willing to bid, they will play other bidders against you to bring you as close to your limit as possible.
This doesn’t mean that you can’t talk to the real estate agent before the auction. Speaking to them offers you a great opportunity to learn more about the investment property. For example, you can get a feel for how much competition you’ll face if you ask how many people have requested building reports for a specific property.
Tip #4 – Lower the Reserve Price
While this may be treacherous territory, lowering the reserve price may help you end up with a bargain if you succeed. Ask the auctioneer if the reserve has been met throughout the auction. This gives the message that you won’t place a bid until the auctioned property is at a sale worthy point. A seller may choose to lower the reserve price if there is low interest. However, this could result in more bidders bidding against you.
Be careful in the case that you’re the leading bidder for a property for which the reserve hasn’t been met yet. In this case, the auctioneer may ask you to raise your bid to meet the reserve instead of ending the auction. This may help you win the real estate property or it may help other bidders to know how the reserve compares to their own budget. Due to this, it may be better to allow the seller to “pass the property in” because this would prevent them from negotiating with other potential buyers. It would also give you sole negotiating rights as a result of being the leading bidder.
Tip #5 – Determine Your Auction Bidding Strategy
If you want to know how to win a property auction, you should know when to bid. Your instinct may be to wait until the auction nears its end to enter your bid. This, of course, could catch the leading bidder off guard. If you aren’t quick enough, however, the auctioneer may end the auction and confirm the sale before you even have a chance to bid or make your presence felt.
Alternatively, some find success in bidding early. You can come in with a large bid from the very start and knock out most of your competition early on in the process. However, this auction bidding strategy can be risky. If you start with a low bid, for example, you risk offending the seller. While this may not sound concerning to you, it will be a problem if you find yourself in negotiations with the seller should the auction not meet the reserve price. A seller who is insulted may not be willing to negotiate with you in this case because they think that you haven’t taken the auction seriously.
Ultimately, you will need to read the room and determine which tactic works best for you. Start by bidding early until you have had the chance to see the auctioneer in action. Based on that, you will see how quick they are to bang the gavel on a sale, which will help you time late bids in future auctions.
Tip #6 – Ask About the Clearance Rate
A clearance rate is a percentage that tells you how many real estate properties an auction has sold during the previous week or month. Knowing this number helps you determine if it’s a buyer’s market before you actually head to the real estate auction.
An ideal clearance rate is below 60%. This translates to low interest from buyers, which indicates lower property prices. An auction house with a low clearance rate means you are more likely to get a bargain. As clearance rates increase, so do property prices at the real estate auction. This also indicates the demand is higher, which could result in a bidding war.
As such, the clearance rate can be a useful indication of how much competition you will face and whether or not you are likely to buy the investment property at a low price.
Tip #7 – Hire a Buyer’s Agent
Now that you have access to these tips, you may feel ready to win at your next property auction. However, following these tips may be easier said than done. Even with this information, you still may not feel confident going into an auction, especially if you are a first-time buyer. The help of a professional agent will come in handy if you want to bid on a foreclosure and win.
A real estate professional removes all of the emotion out of the property auction process. The agent also has the experience that would help you win. All you have to do is disclose to the agent how much you are willing to spend and leave the rest to them. Keep in mind that buyer’s agents charge fees. Some charge flat rates whereas others take a commission on the sale.
To Sum Up
These tips should help you in your goal of winning at a real estate auction. When done correctly, auctions offer a great opportunity for making money in real estate. Looking and acting the part will go a long way in helping you achieve success when you make an offer on a house. Keep in mind that emotional situations can occur when bidding at an auction, especially if you have an attachment to a specific investment property. That said, the key to finding a good bargain and ultimately buying investment property at an auction is to overcome emotions and subjective judgment. All of these factors can help contribute to a positive and pleasant auction day experience. Good luck and happy bidding!
You can start looking for an auctioned property right now by visiting the Mashvisor Property Marketplace.