How do investors know that a property is going to sell at an auction?
Some property investors avoid buying properties at auctions because of the seemingly complicated bidding process, but seasoned auctioneer Tom Panos reveals that all it takes to know your way around the game is asking the right questions.
One of the things that buyers at auctions often worry about is knowing whether a property is actually going to be sold to the highest bidder or not.
Smart Property Investment’s Phil Tarrant explained: “You see auctioneers go through the process of going ‘Calling once, calling twice, calling thrice,’ and you know it’s so far off where it’s going to sell. How do you know, as an investor bidding at auction, when that’s sort of bullshit or it’s getting to a point where this thing is actually going to sell?”
According to Tom, investors keen on buying a certain property can actually approach the auctioneer and ask whether or not the property is on the market.
“You’re not, by law… entitled to get an answer, but most times, you will [get an answer when] you ask the auctioneer, ‘Is the property on the market?’ Because in real estate, [when an] auction lingers, that is asking the auctioneer and the real estate agent, ‘If I bid, is my offer going to get accepted if I’m the highest bidder?’ which is basically saying, ‘Has it passed the reserve figure?’” he said.
“That is certainly a strategy that you can actually use if you’re a buyer—say, ‘Is the property on the market?’” he said.
Having spent 15 years as an auctioneer, Tom has learned to avoid this type of discussion with the buyers by explaining the bidding process to them as best as he could. After all, property auctions work best when momentum and fluency are maintained.
Tom said: “I do, in my auctions, tell people at the start, ‘Buyers, do not wait to hear the words ‘on the market.’ They know… I call it three times… I prefer not to be asked that. The reality is I don’t want to get into a discussion. I like people to be bidding, I like momentum, I like fluency… I don’t like people disrupting the auction [by] asking questions like that, so I try to eliminate the probability of having that asked.”
His advice to property investors looking at auctions as a way to grow their portfolios is to do their research and bid big early. Studying the value of sold properties in a particular area can help you determine the Bargain Hunter Figure, which you can use as a strategy to intimidate fellow buyers.
“The bargain hunter figure is the figure that you mathematically calculate and say, ‘You know what, that’s outstanding value. What I’m going to do is I’m actually going to start the bidding at that and I’m going to knock everyone out with that bid. Bid big early,” according to Tom.
The auctioneer concluded: “What’s the number that the buyer should be thinking of...? They should be looking at sold results. There’s a great saying: ‘There’s no longer any blind dates in business.’ You don’t have to be surprised at results. Everyone knows the price of everything… Your research is done during the weeks leading up to the auction by looking at sold properties in that area.”
Tune in to Tom Panos’ episode on The Smart Property Investment Show to know more about the mistakes often committed by investors at auctions, as well as the simple secrets to finding and securing property bargains even in hot markets.
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