When it comes time for the bidding, there are several different strategies that can be used depending upon the value of the property, number of competing bidders and how much is known about the seller and their circumstances. In most instances, it is sensible to hold back and watch the bidding evolve. If there are two or more bidders, it is not necessary to engage. Let the bidders fight it out until there is only a single bidder left. If, at this stage, the price is in excess of the buyers limit, the buyer should not get involved. If the price is still within range, there is only one other buyer to contend with and this is when the buyer should start.
As the bidding continues, it is easy for buyers to lose control. If this happens, it is important to slow things down. Do not make another bid until absolutely necessary. When it proves necessary to make a further bid to stop another buyer securing the property, alter the value of increase, for example, if successive bids have each increased by 5,000 euro, bid with an increase of 1,000 euro. The auctioneer may refuse to accept this level of increase but it is a risky decision for him to take as he may lose the bidder.
Almost every property will have a reserve price i.e. the lowest price that the seller is willing to accept. Private owners rarely disclose their reserve so in most cases, buyers will not be aware of it unless and until the auctioneer announces that the reserve has been reached and the owner is happy to sell. (In reality, the reserve price may have been reached many bids ago.) This is only ever done if there is more than one bidder. After this point, the remaining bidders continue with the bidding until there is only one remaining. The highest bidder secures the property.
If there is only one bidder but the reserve has not been reached (or sometimes even where the reserve has been reached), the property is withdrawn from the auction and the highest bidder is invited to post-auction negotiations with the seller. This is perhaps the single, most unfair auctioneering practice. It completely defies the very concept of auction and buyers are advised that they can decline to enter these talks. In fact, in a bid to stamp out this unfair practice, every bidder is encouraged to let the auctioneer know in advance that they are bidding at auction only and will not retire into private negotiations. With this communicated, sellers will have the choice to either accept the highest bid or withdraw the property and try to sell it through private treaty. This point cannot be made strongly enough.
The auction process is pro-seller, buyers should not perpetuate this further by handing over their only advantage. Simply put, if the property is put to public auction and achieves the reserve, it should sell at public auction – too much property business has taken place behind closed doors, buyers need to assert themselves here to stamp out this practice for once and for all.
This should not be an issue at the upcoming bank auction at The Shelbourne Hotel, Dublin on 15th April 2011 as each property has a stated maximum reserve price. This means that once bidding has reached the max reserve, the highest competing bid thereafter will secure the property. As this figure is the maximum, in reality, the sellers may accept less on the day. On this basis, I would expect cash investors to achieve a few bargains on the day. Home buyers may be disappointed though.
In the next post I will go through engaging a professional, independent bidder to attend and bid at auction on behalf of the buyer. In the meantime, please do not hesitate to contact us directly in firstname.lastname@example.org or 01 4428 035 for full auction particulars and advice.
~ Carol Tallon
Author of the Irish Property Buyers Handbook 2011 (published through The Liffey Press, May 2011)