How To Bid For Property At A Real Estate Auction

If you’ve never bid at a real estate auction before, the process can be confusing. We’ve all seen stories involving auctions in movies or on smaller screens. Typically, there’s a suave bloke in an antique auction who only has to raise his eyebrow to bid successfully. Sometimes he raises his hand just slightly, and the auctioneer spots him in the crowded room. Despite all the distractions, the old geezer with the hammer faultlessly registers this chap’s bid. You get the feeling if he suddenly scratched his nose, he might unexpectedly find himself with the winning bid. Who even knows if he was just a spectator and wound up owing $10 million? It somehow appears dangerous. But is that really how it happens? You’d be tempted to think so, but it’s not like it is in the movies. There is etiquette involved in bidding at a real estate auction.

How Does A Real Estate Auction Work?

If you’re planning to bid at a real estate auction, you must register with the vendor’s agent. You are then issued a bidder’s number. On the day of the auction, show your ID to the selling agent. You’ll then be handed a paddle bearing your number. For obvious reasons, you cannot exchange this paddle, and it’s not intended for playing ping-pong. That is unless the auction is exceedingly dull. However, that’s unlikely as auctions tend to be tense and exciting affairs. At the auction, your paddle is your best friend. Whenever you bid, you need to raise your paddle so that the auctioneer can identify your number. If it’s a hot day and flies are about, it’s probably not a good idea to use it as a swat. This action may be mistaken by the auctioneer as you making a bid. Now, watch the body language of other bidders.

You need to keep an eye on the other bidders. One of the biggest mistakes a novice bidder makes is not paying attention to the competition. Look for telltale signs that you’re about to be outbid. This could be a couple whispering intensely to each other before they raise their paddle. And if somebody is looking smug and confident and raising bids, it might be that they have bottomless pockets. But there is such a thing as a “desperation bid.” When somebody raises the bid, knowing they’ve busted their budget but hoping to snatch it, this is an indication of desperation. By all the best advice, if you can afford to, you should immediately bid higher and knock them out of the race. Whether you bid aggressively or restrainedly depends upon the momentum of the auction. You’ll soon know whether you’re in for fierce competition or the bidding is slow.

How Not To Bid At A Real Estate Auction

There’s much to know before bidding at a real estate auction. For instance, we’ve covered what you should do. However, there are things to avoid at an auction. For a start, while you need to monitor the body language of other bidders, remember that they’re watching you. If you appear anxious or excited, you’re telegraphing your emotions. You don’t want to do this as you’ve just divulged that you’re uncertain, desperate, or planning a bid. You must keep your poker face at all times. Next up, don’t be impatient to be the highest bidder. This will lead to you jumping the gun and exhausting your bids too early. This isn’t about getting the property at all costs, but working in tandem to keep the price as low as possible. Only the auctioneer knows the vendor’s reserve price.

Remember, the reserve price differs from the guide price, which is disclosed. The reserve price is what the vendor will accept but sincerely hopes to beat. If a bid reaches the reserve price but no higher, the final bidder wins. As such, be aware. Avoid bidding indecisively if you’re unsure about the property. If you’re nervously raising your paddle, you may find yourself the owner of a house you aren’t that keen on. So you must pay attention at all times and not drift off into a daydream. And don’t get caught up in the rush and forget your budget. If you do, you may easily exceed the reserve price while unintentionally becoming the buyer. Then you’ll be stuck with it and it’ll be your fault. Given what could go wrong, it certainly behoves you to enter into a real estate auction with a strategy.

Do Your Research Before You Register

Before you even register to bid at a real estate auction, you need to be sure you want the property. Is it the right home for you? You’ll have a chance at an open inspection before the bidding commences. However, commonsense dictates that you research the property and the market beforehand. You should seek a history of the property and find out how often it’s changed hands. Get an idea of its appreciation or depreciation. This means there’ll be costs involved. A vendor is under no obligation to disclose any faults with the building. Therefore, the smart bidder pays for a building report, an insect report, and/or a strata report before making a non-negotiable agreement. Not only does this let you know what you’re in for, but you’ll also get an idea of the property’s actual worth. To that end, research similar properties and attend their auctions as a spectator.

Beforehand, there is much to do. You’ve ascertained a reasonably accurate idea of the property’s value by obtaining the abovementioned reports. Although you haven’t bid, you’ll want a copy of the contract and review it with your solicitor or licenced conveyor. Be certain that you’re comfortable with the terms. Confirm the maximum purchase price you can borrow from your lender so you don’t over-reach yourself. The contract is unconditional and legally binding, so if you sign it, you’re still legally liable for the contract. This could mean borrowing more and paying the lender’s mortgage insurance. You should already have entered the auction with a cut-off price in mind. If preferred, you can approach the agent before the auction and make a pre-auction offer. Thereafter, the negotiation becomes the same as a private sale. That’s worth considering if you’re dead set on the property and your price is right.

Set Yourself A Strategy

You should create a strategy for yourself before going in to bid. Take your maximum buying price and split it into three budgets. The first budget is your preferred price or the price that you would be excited to pay. This will be estimated at some point above what you imagine the reserve to be based on the guide price. The second budget is what you reckon to be a fair above-reserve price (although not too far above). This is the budget that you’ll bid towards. Hopefully, somebody else will start the bidding at a lower price than you. Finally, the third price is the maximum purchase price you’d be willing to pay. Outside of this, there are no more bids. Once the bidding breaches this third budget, all bets are off.

Thenceforth, depending on the momentum of the auction, break your three budgets down. You’ll have to be fluid, but if your estimations are close to the mark, you can bid comfortably. Start by bidding 85% of your opening bid before offering up the first budget. Repeat this method accordingly and in fluency with the other bidders. Bid fast and furiously. By bidding quickly, you’ll project an air of confidence that suggests that money is no object to you. If the bidding starts with, say, $110,000, then bid $115,000, so the bidding rises in increments of $5000. Hopefully, you’ll be able to control the bidding and thus your final budget. Don’t be afraid of being sneaky, either. Throw a few curveballs in there to distract bidders who can’t keep count. For instance, make a bid of $8000 higher and then $3000. You’ll be amazed at how many struggles to keep count.

Auction Day

We’ve covered your registration and the bidding process. It’s auction day, and you’ve made one last inspection of the property. Now is the time to put your strategy to work. Much of the process will already be outlined in the buyer’s guide you’ll be given. You’ll be made aware of all the terms and the rules. For instance, the highest bidder is the buyer subject to any reserve price. The auctioneer is entitled to make one bid only on behalf of the vendor. They must announce this before the commencement of the auction. The auctioneer can also veto a bid that isn’t in the interests of the seller. After the fall of the hammer, the auctioneer can no longer authorise a bid. That’s when they say, “Going once, going twice, sold to the lovely lady in the purple hat.” Or something like that. The auctioneer decides on any disputed bid.

If the reserve price isn’t met, then the auctioneer declares the auction as being “passed in.” That means the property is withdrawn from the auction. However, the highest bidder wins the first right to negotiate with the seller. An auction is different from a private sale in that there is no cooling-off period. Every bidder must be ready to turn in their contract in the event of a winning bid. When the property is passed in, contracts are exchanged, and the winning bidder must pay a deposit of 10% of the sale price. Again, the contract is non-negotiable and by “passing in”, you are legally liable for the contract. Any shenanigans will see you lose your deposit, and you’ll be at a financial disadvantage at the next auction. Otherwise, you can prepare to lay down the welcome mat and the little plaque that reads, “Home sweet home.”


Bidding at a real estate auction can be fun and exciting, as well as provide a much-needed adrenaline boost. The stress that accompanies making offers and counter-offers in a private sale is sped up dramatically. Instead of sweating it out over a protracted period of negotiation, the sale is done and dusted on the day. You pay your deposit, settle the contract, and move in. Likewise, if you sell your property by auction, the same thing applies only in reverse. It can be a very satisfying, albeit tense, experience. Again, it pays to attend a few auctions before bidding on a house. If you are a seller and choose to sell your property by auction, you’ll need an agent. This is where the Perfect Agent will prove of inestimable value to you. We will match you with the best real estate agent/auctioneer free of charge. Contact us today!