Bidding against yourself

In a “normal” market like today, where prices are neither in free fall nor rapidly accelerating, most property transactions occur via negotiation between two parties – vendor and one buyer. 

So, for example, when you see a clearance rate of 70%, it often means that out of 10 auctions, two sold before, two sold under the hammer, three passed in and sold directly afterwards, and three passed in and didn’t sell. 

So only two out of 10 sold ‘under the hammer’. 

Under the hammer effectively means that two or more buyers were willing to pay above the vendor’s reserve. 

Granted, some of the ones that sold before or passed in may have had multiple buyers/bidders, but still required a negotiation (with one buyer) to close out the sale. 

There are two major take aways from this. 

Firstly, auctions are still very effective even if you don’t sell under the hammer. 

Auctions create urgency and finality. They are the full stop at the end of a campaign. 

An auction is still transparent even in the absence of competition. 

If you are the only bidder, you get an exclusive seat at the table to negotiate. 

All negotiations are essentially the same – whether off market, private sale, pre auction, EOI or a post auction / pass in situation – the aim is to negotiate a mutually beneficial outcome, which generally means some compromise on both sides that still ends in a win-win. 

I detest the phrase, “why would I bid against myself?” 

That’s the wrong way to look at it. 

When you’re negotiating a higher salary, your employer isn’t sitting there going, “why would I bid against myself?”

When you’re at E&S trying to get a deal on two Miele ovens you don’t offer 20% below the listed price and when they politely decline say, “why would I bid against myself?” 

The vendor owns the property. Don’t think just because there isn’t another buyer banging at the door right now or no one else bid that you have the right to steal the place.

There are many reasons why buyers don’t bid. It’s not always about price. 

The next buyer is just around the corner and may be willing to pay more than you. 

Just because there is no competition at this minute, it doesn’t mean there won’t be tomorrow. 

We see it all the time. 

A buyer senses a good deal as they were the only bidder and digs their heels in during the post auction negotiation. $10k more and the property is theirs but they walk. 

That afternoon a new buyer inspects and offers the full asking price. The agent does the right thing and refers to the first buyer. 

The first buyer now realises they don’t want to miss out, so a bidding war ensues, and the first buyer secures the property for $67,000 more than they could have paid hours earlier, when there was no competition. 

Or worse, they miss out for $1,000… and $66,000 more than they could have bought it for hours earlier. 

Experienced agents who have been doing this for decades tend to give the same advice to their best clients, friends and family when buying… “Don’t miss it for $10,000 / $20,000 / $50,000.”

You’re not bidding against yourself. You’re securing the property for a price you’re still comfortable with, and still possibly less than you would have been willing to pay if there was competition.

Feature image: 19 Bonview Road, Malvern