An auction moves through 3 distinct stages and if an auction was a dance, it would be called the ‘Slow, Quick, Slow step’.
The reason I bring this up is that as a seller or a buyer, it will help you immensely if you understand how to recognise these stages and what drives each one.
The first stage is slow. Its pace is slow, and buyers are cautious. As I’ve said, at the early stages, buyers aren’t so much trying to win, they are trying to find out who they are competing against and how they are bidding. Most bids made are to see the response. And they are watching not just the response of other bidders. They are watching the response of the auctioneer and the salespeople working to encourage the bids.
The bid amounts are below market value. Buyers aren’t thinking these bids represent real value for the property or that the owner sell for these amounts; they just want to see how the other bidders bid. This is when you’ll often see tactics like bidding $1,000 more than the last bid or waiting until the 2nd call before making a bid. Both are intended to slow the progress of the auction. We will get into tactics in other posts but just for now, know that everyone tries their tactics out in this early stage to see how they work against others.
My focus as an auctioneer, is on how many bidders have made a bid. As a salesperson, I’ll encourage bidders that it is safe to bid, to have a go. Those that want to wait, I note and come back to when the next stage happens.
Now the common mistakes.
Starting the bidding too high. If bidders don’t have enough ‘bidding room’ (bid levels that are well below market), they aren’t able to work out who’s who in the zoo and are forced to hold back. If a bidder can’t use their strategy, they often find themselves without a game plan and they become more uncertain and cautious. Remember the rule of thumb, bidders, left to their own inclinations will usually start bidding about 25% below market.
Focusing on the first bidders. Once you have two people who have made bids, the easiest next bids are from them. Salespeople must leave them alone and focus on the bidders who are yet to bid. The bigger the base, the higher the pyramid. Likewise, the more people bidding, the more people will bid.
Bidders believing there is one best approach to how they bid. There isn’t. It always comes down to how you respond and adapt to others. Again, we will get into tactics later but for now if your approach isn’t working, change it. If you have an auctioneer that rejects your bid, and you hate him, hate him later; you have a home to buy. Come with multiple game plans and play. The early stages of an auction are where you can try them out.
Author – Stephen Jackson.
