In property, as in life, there are no prizes for coming second. Just ask any auction under bidder – that is someone who has just missed out. Shannon Davis will have a look at the vulnerability of the ‘under bidder’ and how that can lead to some disastrous decisions.
Kevin: As auctions become more and more popular around Australia, we are finding that you need to understand about the auction process and especially if you find you’re in the position of being the under-bidder – you maybe just missed out – some critical areas where you could make mistakes in a scenario like this. Joining me now to speak from his experience, Shannon Davis from Metropole Properties.
Shannon, what do you see are some of the big mistakes that happen in a situation like this?
Shannon: I think the biggest vulnerability that buyers show is perhaps when they’ve just been an under-bidder at an auction. Auctions can be stressful. The high-demand properties usually use that mode of sale, and when you’ve missed out maybe once, twice, or three times, it can feel like the whole world is against you. Nothing pulls at a buyer’s emotions just like an auction campaign and an unsuccessful one at that.
Kevin: We are seeing a number of people who are getting very frustrated with the auction process, missing out on a number of properties and finding that they just get to the end of it and they think, “I’m sick of this,” and they end up almost making a snap decision on what could be the wrong property and even paying too much for it.
Shannon: Definitely. I call that one the fed-up purchase. There has been a lot of buyer remorse with that. They’ve missed out a few times and they’re just probably too emotional and vulnerable to really be making smart long-term decisions at that point.
I think you need to know what price you want to go to and kick yourself that someone would buy it at that point. Once you have that point, stick to your limits and you need to shut it out after that. Preparation will bring you confidence, so the more you prepare, the more you’ll know your values and missing out won’t probably hurt as much.
Kevin: Very difficult, isn’t it, for someone who really, really wants a property they love. You can see in some of these television shows where they actually go well above what they had planned to pay because they just don’t want to miss out. That emotion, take that away and maybe have someone bid for you and make those decisions on your behalf.
Shannon: Yes, definitely. It can be a competitive experience. A lot of persuasion going on with lots of agents at that time, and you’re being vulnerable to those urgings and maybe not going to make a sound long-term decision because you’re just fearing the missing out. That’s what really makes people overpay and perhaps even just buy a property that wasn’t in their original objective.
Kevin: I know, as a buyer’s agent, this is what you do all the time. This is your job, so you’ll go and represent someone at an auction, you’ll bid on their behalf, and you’ve obviously established a limit with them before you go into that auction. From your experience, in a market like we have now, how many times would someone have to miss out on a property to secure the one that they want? Do you have any stats like that?
Shannon: Yes, I think you need to make sure you’re looking at the right price range. If it’s a very buoyant market, things are creeping up all of the time, so perhaps you have to put into check your expectation for what you’re looking at and you might be looking at the wrong price bracket.
But when we’re representing people, we’re looking to make our first bid our last. We’re going to stick to our limits and we’re looking to stifle the momentum of the auction because we’re trying to do the opposite of what the auctioneer is doing. The auctioneer will start with the bargain hunters, then move up into the more genuine buyers, and then hit the real emotional buyers last and draw every penny out and pause and use lots of discussions to try to keep people on the hook.
We don’t want that to happen, so we’re not looking to pinch it; we’re looking to get it to a fair market price pretty quickly and walk away once their limits have been reached.
Kevin: As a bidder, do you use strategies to try to knock out some of the other bidders, come in with a big, powerful first bid? Do those sorts of strategies work, Shannon?
Shannon: A good first-off bid and every bid straight back out strong as the last and making sure that you have the body language and position in the auction to know where all your competition lays. The more questions and notes you can take on that, the better.
Kevin: Yes, I suppose you do also get to know the auctioneer. Do you find it easier to intimidate other bidders as opposed to intimidating the auctioneer?
Shannon: We’re doing this four or five times a week whereas other people are doing it four or five times a lifetime. An auctioneer is doing this four or five times on a Saturday, so really, it’s hard to intimidate an auctioneer, but with bidders representing themselves, it can be a lot easier.
When you go to particular auctioneer’s auctions, they all have little tells and tricks and words and phrases that they use. Over time, you get to know when it’s on the market and getting close to its end.
Kevin: Thanks, Shannon. Always great talking to you, mate. Shannon Davis, of course, is a buyer’s agent and he is the director of Metropole Properties. Shannon, thanks for your time.
Shannon: No worries, Kevin. Any time.