The Ultimate Guide To Renovation Course - Module 6: Auctions

So let's get on to bidding an auction. Auctions are designed to create a high pressure environment in which people will pay over their previously set limit. They are a piece of street, high tempo theatre that often sees people swept up in the moment, emotionally competing to be the highest bidder. Auctioneers are very skilled at generating this environment. For them, it's all about controlling the speed of the auction and the amount by which the price goes up. So here's some auction techniques. Most of the techniques below are based around taking the heat out of the auction process. The idea is to give the emotionally charged competitor opposite you time to think about the ramifications of their overspending. Ultimately, if they are willing to pay more than you, they will buy the property. But often properties are lost to people who are bidding well over what they had defined as their limit 10 minutes earlier. An auctioneer is skilled at making buyers limits fade into distant memory. They will often say things like it's just $1,000 more and all of this could be over and you'll get your weekends back. What about this one, sir? It's. It's only $1,000 more and it could secure you this magnificent home. But think of the conversation on the drive home if you miss out. Or sir, I'll give you a moment to discuss this with your wife to decide if you really want to let this home get away for $1,000 more. In a few moments, you could be drinking champagne inside your new beautiful home. Or instead, you could be drinking from the cup of regret. Of course, what these colourful statements conveniently ignore is that it's not $1,000 more if the buyer is already $67,000 over their original bidding limit. It's important to decide on an auction strategy prior to the commencement of the auction. You then proceed without a motion up to your predefined bidding limit. It's important you stick to this limit. This is the wrong time to start thinking about where you can save on renovation costs. You. If so, you can pay a little bit more. Let's have a look at the slow method taking the heat out of the auction. In this method, your job as an effective bidder is to wrestle with the auctioneer for control of the pace of the auction and the increments in which the bids are placed. At the start of the auction, the auctioneer will call for an opening bid. If none are forthcoming, they will place a vendor bid. Sometimes the vendor bid will be at a reasonable level designed to spark competition. Other times it might be to appease the vendor who has a very high price expectation in most cases, in an effort to control the auction, I like to place a bid early and even the opening bid. So let's look at how much to bid. I want to bid low, but the trick is to find a figure that is not so ridiculously low as to trigger an immediate vendor bid. In response, I try to choose a figure that the auctioneer will believe he may be able to work up from without immediately resorting to putting in a vendor bid. If the auctioneer does put in a vendor bid, and I was the last person bidding prior to this, I would stop bidding straight away. By continuing to bid, I'm just competing against myself. A vendor bid is an artificial bid. It is in no way representative of feedback on the market and what the property is worth. Now, it's surprising when I'm attending auctions how many people don't understand this concept and they make this mistake. They bid against themselves. However, if someone else places a bid in excess of the vendor bid, we now have returned to a real auction and the auctioneer has just succeeded in controlling the bidding increments. So let's have a look at those bidding increments. From an auctioneer's point of view, the bigger the increment, the better and faster the reserve is reached and surpassed. The auctioneer's ideal scenario is to still be in a large increment, say $20,000, when. When the reserve is well and truly passed. And only after the bidding has slowed down will they announce the property is on the market. This is to give the impression that the competing buyers are not paying way over what the vendor was willing to accept. From our point of view, we want the opposite to happen when the auctioneer is calling for bids of $20,000 or for $10,000. If this is accepted and a competitor also bids $10,000, make your next bid $5,000. The idea is to get to $1,000 bidding increments or lower as soon as possible and thus slowing down the auction. This tactic often frustrates the auctioneer and they will refuse to take your bid. He'll say something like, I'm sorry, I'm only taking 10s at this moment, but you should be persistent. Just smile and say, ok, thanks anyway. The auctioneer will continue to call for bids and none are forthcoming. Then you can put your bid in again. $1,000, please. Unless you are in a very hot market, this tactic nearly always succeeds in taking the heat out of the auction. So let's look at knockout bids. At this stage, you may Then find yourself repeatedly bidding against another person in smaller and smaller increments. This is where you may need to reverse the tactic and drop the occasional knockout bid. If I sense my competitor is approaching their limit, usually indicated by conferring with their partner, or I put in a $5,000 or $10,000 bid in an attempt to knock them out. At this stage of the auction, it's a matter of playing it by ear. So let's look at starting high. This method relies on knowing very precisely what the house is worth to you as a renovation project and being willing to pay potentially $10,000 or more than your closest bidder. Because the deal stacks up, Opening the bidding high is a shock method designed to wrong foot your competitors who are expecting expecting the bidding to open low and proceed in an orderly manner. It also immediately knocks out the bargain hunters from entering the auction. When another bid is placed, come straight back at them with a large increment, say $20,000. You then repeat this up to when it's close to the proximity to your limit. The danger in this technique is with the last bid because you could end up paying $20,000 above what your competitor was willing to pay. Now, this is a high risk technique which relies heavily on you knowing your numbers inside out. Ok, let's have a look at the Crazy lady technique. This is one of my favorite techniques, the Crazy lady. And this is told to me by mortgage broker and property coach Medine Simmons. The Crazy lady technique involves dressing in a silly looking frilly dress with a bow on the hair and loudly bumbling the way through the auction process. Each bid is exclaimed loudly in an extremely enthusiastic manner. The Crazy lady then proceeds to bid against herself. Why? Because she's crazy. This is certainly a disruptor of the flow. It gets a few laughs and the auction seriousness is almost reduced to a sideshow. This is how it might go. Let's say the bidding is currently at $310,000 and our crazy lady's reserve is $381,500. Note, the limit is rarely a round number, just so you can always get in an extra bid. The Crazy lady enthusiastically throws out a bid of $330,000, a jump of $20,000 when the auctioneer was calling for tens. After a brief pause, but before any other bids have come forward, she enthusiastically proposes another bid. $340,000, she says. The auctioneer politely informs her that she's already the highest bidder and thanks her for the enthusiasm. Someone else places a bid of $345,000. She immediately springs into a life with a $360,000. The auctioneer asks for rises on $360,000. They're not going to knock that back. Crazy lady is back with $370,000. By this stage, the flow of the auction is fully disrupted and even the people around Crazy lady are telling her that she shouldn't be bidding against herself. They may even give advice telling her she only needs to go up in increments of $5,000. Like the high opening bid method, this technique relies on knowing exactly what the property is worth to you because you may be potentially paying $10,000 or more than the closest bidder. So be creative. Please send me news of your result and accompanying photos to jane@yourpropertysuccess.com now just like all the other auction techniques described in this section, the Crazy lady is designed to disrupt the flow of the auction and take the heat out of people's budget, busting decisions in the heat of the competition. At the end of the day, if a Focus buyer is willing to pay more than you are for the property, then no technique other than increasing your budget will secure the property. Personally, I am not one for playing too many games at auctions. The main strategy I apply is trying to slow the increases down. I know my limit. I bid till I get there and then I stop. To me this technique is less stressful, less confusing and it suits me. I also set a limit that is not a round number so I can put in an extra $5,001,500. So my bid might be $236,500. If you are one of those people who really hates auctions, hire a buyer's agent. The $500 could save you a lot of loss of sleep and thousands of dollars. If the property is passed in and you are the highest bidder, don't go inside to negotiate. Resist if you can so you can keep an eye on the second highest bidder and the discussions that are going on there. So try to stay outside or on the front porch and negotiate from there. It's typical at this stage to have secondary negotiations take place with these other parties and the real estate agent his best to keep you behind a closed door so they can transfer information back and forwards to themselves and you are not privy to it. From the front porch you will have a good view of the street and what competition is hanging around. If there is no competition, you can negotiate harder. Here's another technique from Nadine Simmons. Pull out your phone straight away and call your voicemail so your phone doesn't ring. This could really kill this technique. Then stop, take a breath and watch. Watch everyone leave the auction. The show is now over, so you'll know if there's another interested party or if you are it. Now, this gives you negotiating power. Take some time. I also come armed with my research. As the highest bidder on my first property, I showed comparable sales. I showed my horrible pest and building report that indicated $50,000 was needed just to make the property livable. By doing this, I showed I was not going to be manipulated. In actual fact, I was terrified. I just didn't show it. I knew it was below what the price indication was, but I also knew the owner had tried to sell the property in two previous years. Yes, we love the Internet for research, don't we? And this was possibly her final straw. I got the property for my price I wanted on the day, even though there was another interested party. Incidentally, their technique was saying to the real estate agent, no one that young can afford this. The sale will fall over. Tell us their highest offer and we'll put on an extra thousand dollars. Obviously, now we know how agents are paid, we know that they're not making anything on that extra thousand dollars. And in truth, it's just not professional. Use your settlement time wisely. During settlement period, use your time wisely buying products and supplies for the renovation. Also, make sure that any building permits and any other paperwork is in place so that the day you take control of the property, you can get to work in this module. We've looked at the process you need to follow to get from wanting a property to owning a property. The important thing to remember is that you are in control of the negotiations and hence you need to know what you ideally want your bottom line to be. The clause inclusions are a must, especially your subject to finance clause. So what's next? Now you have the property, the fun really begins. Now you might Notice in this 12 module course, we only just got to owning the property in module six. That is because buying well, a property that fits your strategy and delivers you the result you want is where so much of the hard work is. So let's get on to the fun stuff.