Defining effective auction bidding?

The number of people I’ve met who believe that auction success is solely based on budget is numerous. Plenty of buyers believe that bidding style has zero impact on their chances of success.

What they misunderstand is two-fold.

Firstly, they are assuming that every other potential bidder is resistant to any sense of fear, intimidation, awkwardness or embarrassment. Clearly, there must be humans out there who would rather avoid an auction than stand in a public space and shout out bids. After all, an estimated 75% of Americans are uncomfortable with public speaking, and some strong statistic are evident for those who actually do suffer glossophobia, (fear of public speaking).

Not that auction bidding is necessarily the same as public speaking, but considering the large numbers of people who have a negative association with public speaking, it’s fair to assume that there will be a proportion of buyers who feel similarly towards auction bidding.

When this is combined with a feeling of intimidation from other, more assertive and more confident buyers, the chances of success for the bidder who is already feeling totally uncomfortable will diminish.

The impact of a confident bidder staring another bidder down cannot be underestimated.

Despite any amount of planning, they could find it difficult to think strategically under pressure. They could also struggle to communicate effectively with their partner with any budget re-assessment discussions, (and we all know how much of a pressure-cooker impact an auctioneer can have during the final stages of an auction call while a hundred other people may be watching on).

This is assuming that they had a plan to start with.

This second point is the second mistake that many people make when they assume that bidding success is only about budget.

Not every bidder has a firm plan. In fact, by my broad observations, I estimate that around 50% of active bidders have a vague plan, 30% have a firm, but flexible plan, 15% have a firm and non-adjustable plan, and 5% have no plan, (some of whom didn’t leave the house that day expecting to buy a property).

Of the vague plan people, they may have a general idea of where they believe value sits for the property, but they won’t have a firm upper limit or a designated ‘walk away’ price. Their assessment of value will most likely be a round number and they will probably be quite prepared to have some flex. They will also likely chat to their partner and make bid-increase decisions during the auction.

These buyers are more likely to be susceptible to intimidation tactics or a change of heart when bidding gets tough.

The 30% who have a firm and adjustable plan will likely bid stronger and will be less impacted by others until they are in their ‘non-adjustable’ price territory once the property is on the market and competitive bids are still coming.

During the final stages of the auction calls, and particularly when the auctioneer is applying pressure to the two final standing opponents, this category of buyer will be feeling the heat while they try to navigate their price-reassessing in front of a crowd. They typically have been consultative with each other in the pre-auction days, so the decision to stretch the budget in the face of tough conditions will, most likely also be consultative.

Our observation is that consultation with a partner during an auction usually heightens stress levels for the bidder.

What is usually a very private conversation is now totally uncomfortable.

The 15% who have a firm and non-adjustable final figure may be nervous, but they have a mandate and they’ll likely apply it and bid to their plan. Those who hire professional bidders will likely fit into this category also, (provided they don’t have a bidder who will call them or tempt them to increase their budget during the auction).

These ~15% of buyers are not as likely to be rattled by another bidder, despite how nervous they could feel.

And the final category, the 5% who have no plan are very unpredictable. After all, someone who buys a house without a plan, a budget, or (for a lesser number), without any intention of buying a property that day – are on a different wavelength altogether. They may be impervious to any clever, intimidating bidder tactics because they aren’t applying much rationale to what should be a very careful decision in the first place.

But considering the number of bidders out there who are nervous, uncomfortable and don’t have a firm plan, a confident and assertive bidder should absolutely have some degree of impact on the result.