Auction Strategy That Actually Works: Expert Lessons

Whatever strategy you choose, and again, I don't think there's a guaranteed successful one, you want to be relentless and keep the pressure on once you do decide to start bidding. For a lot of people who are going to auctions, they're probably thinking with that mentality, if no one bids for it, I can kind of come in after when it's behind closed doors and get a really good bargain, but it sounds like it's really just not the case. People who want to sit back and see the property passed in and then go behind closed doors and negotiate, I don't think that's the right way to go about it. You're there to set up your family for the next 10 or 20 years or buy your next investment, and you should show everybody that you're serious. Hey, everyone.

Welcome to another episode of The Property Nerds. Today, we have Paul Hancock. Now, he's one of McGrath's leading agents. He's also recently just won Auctioneer of the Year, which is super exciting for him. We'll be jumping into this episode and going into a few things, largely just focusing on auctions, whether you're a vendor, whether you're a buyer.

He's got some really interesting stories and tips and tricks. Let's jump into it. Nerd alert! Property Nerds, the home for data-driven property investors, where we uncover Australia's hot and cold markets, latest headlines and trends. Welcome to the show, Paul.

Thank you. Great to be here. Appreciate it. Yeah, absolutely. Now, I know that for everyone watching, you're probably noticing Arjun looks a little bit different here.

Unfortunately, Arjun and Jack couldn't make it for this one, so it'll just be me and you having a good chat. That's fine. We're 10 seconds in and you're doing a great job. Thank you so much. Well, look, firstly, I wanted to say congratulations.

I know you recently won Auctioneer of the Year. I did. Thank you very much. Yeah, that was the REI New South Wales Auctioneer of the Year. It's something I've been trying to get my hands on for a little while now.

It's actually decided by an auction competition. So we compete every year. A bunch of auctioneers do an auction competition and you sort of make a final. And then from that, you can kind of go ahead to the Australasian Championships from there as well. But to win the New South Wales one is something I've been trying to do.

And there's plenty of really good auctioneers out there, so it's hard. Everyone's very competent and it's tough to get your hands on it. So it was nice. It's been, like I say, a niche I've been trying to scratch for a while. So it was nice to finally get across the line after some near misses.

Yeah, absolutely. Well, congratulations. Really well deserved. Appreciate it. And I know all of the people listening in today will have a whole bunch of really great insights that they can get from you.

I'm going to ask you a whole bunch of questions, I think, from the buying side and the selling side, just because auctions are becoming a lot more of a thing now. Things are ramping up, markets are heating up, and everyone's starting to move towards auctions, especially in the capitals as well. So look, first off, I might just ask, when it comes to an ideal auction campaign, I'm sure there's a lot of things that get involved with the campaign. Usually length is a pretty big thing. People are always thinking about how long should I do it for?

Should it be two weeks? Should it be four weeks? Is there ever really an ideal length? I think at the moment, I feel like three weeks is actually a bit in the sweet spot. I think four weeks has sort of been the traditional, sometimes even five length for an auction campaign, but it's sort of getting a bit long.

And when you're in a market that's got a lot of stock at the moment, at the time of recording, we're in the middle of spring, and there's a fair bit of stock online out there for people. There's a lot of options. A buyer seeing a property in week one and still being there and interested and ready to bid and compete in week four sometimes is a big ask. So I've got some agents who run two-week auction campaigns, or they will run an auction campaign and book it in for three or four weeks out and literally run the auction a week or so in. They'll have a few people come through.

They'll have people requesting contracts and wanting to bid and make offers. And they'll say, let's just run it a week in. That is probably a bit short. I think sort of around that two to three weeks is the ideal at the moment anyway. Okay.

Yeah. So it's kind of a two to three-week period, and then they adjust accordingly if they see things going crazy. Exactly. Some auctions get pushed back for whatever reason it may be. There might not be traction there.

They might need to revise guides. They might have just logistical reasons as to why they need to push it back. Some get brought forward because there is significant interest on the property, and agents don't want to sort of risk them getting distracted by other properties or buying something else. So that will bring the auction forward. So that's why I think around that three-week mark is working pretty well at the moment.

Yeah, it makes sense. And I think especially as you mentioned, you've said at this point in time, it's very much when the markets are running hot. Exactly. It can change. Exactly.

But I think three weeks is generally pretty good, and agents like that. But yeah, as I said, I spoke to an agent yesterday, and he's doing two-week campaigns at the moment. And if you're struggling, there's always flexibility to push it back and do different things with it. Yeah, awesome. I know that there's a lot of different techniques, and usually, especially for people bidding, they're always trying to think of the ideal technique.

How can you perfect it and always win every single auction? And some people like to go in at the start. They go, hey, if I'm going to make the first bid, I'm going to, I don't know, maybe assert my dominance with everyone. That's the way that they go through it. Whereas I know previously, I mean, I don't know if this is a common term, but when people were really big on auctions on eBay, they would always try to snipe items coming in at the last minute.

And there was no visibility. There was no system to stop that as well. It might be a little bit different with real estate auctions, but are you seeing that there's a better technique to sort of run through? It's a great question. People ask about auction strategy all the time.

I don't think there's sort of one hard and fast rule that's going to work, and there's certainly no strategy that's going to win if someone's got 100 grand more to spend than you. It doesn't matter what you do. If someone's just got a bigger budget, there's very little you're going to do to stop them. But I think if you end up with a similar budget with somebody else, that's where strategy can definitely make a big difference. Some people, like you say, like to come in really aggressively.

We see people who are experienced developers, buyers, agents. They don't tend to wait. A lot of the time, they come in really quick. They'll make an aggressive first bid, well above the guide or certainly at the guide. They're there to, like you say, show dominance.

Some people like to sort of start and get involved and then disappear for a while and then have everybody think that they're out and they come back. I had a guy do that on the weekend really well. He looked like he was out and bid early. And then at the very last minute, we're on the market. I've said we're selling.

I've confirmed that. Three calls. At the last moment, he comes back in, and it almost broke these guys' hearts who nearly had it. I was as shocked as they were, and he ended up buying the property. I think if people are going to bid late, again, there's no strategy that's definitely going to work.

It's just going to depend on auction to auction. It depends how many registered bidders you've got. If you've got two as opposed to 10, that should probably alter your strategy as well. Most people would tend to wait if there's a lot. If there's only one or two or three, well, one's different again.

That's a one-bit negotiation. But if there's only two or three of you, I would be aggressive early on, and I'd just try and have the highest bid all the time. Essentially, I had some great advice from an auctioneer, Pete Matthews, who's a really good auctioneer and taught me a lot when I was first starting out. But he said the one person who's under the most pressure at an auction, and there's a lot of people under pressure at an auction. There's the auctioneer, there's the agents, there's the vendors, and, of course, the bidders.

But the person who's under the most pressure is the underbidder because they're the ones having to make a decision there and then. They're the ones who are trailing and need to go again if they want to bid. And the best way to not be under pressure is to be the highest bidder. So in terms of how you play it is up to you. My advice to buyers when I speak to them after an auction, if they've missed out, I'll try and help a family or a couple who have missed out, and it's their first or second auction.

I'll always tell them, look, when you decide to come in is up to you if you want to be aggressive from the start or if you want to wait until it sort of gets closer. And some people wait to hear the words that we're selling or on the market. It's a tricky element that we have to deal with I'm not in the business of trying to push people away and headbutt people on the auction floor and upset people by saying no all the time. But if we've just started and it's early in the auction and people are trying to give me small amounts, they can probably expect it's not going to get taken. It's not going to get accepted because it's just going to keep the auction going far too long.

We've got a busy day, a busy schedule. We can't spend an hour at an auction. We allocate anywhere between 15 to 30 minutes for an auction. And if we're too far away, then the auctioneer will be pushing back on those bids. But yeah, look, it happens.

And again, there's so many hundreds of scenarios that can play out. I can't go through them all now. But once we're on the market, essentially, once we're selling again, you're going to be less likely to reject an amount. You're going to be wanting to take anything and everything at that point because we're selling the property. But if we're way away from expectations, then you're going to control the bidding a little bit more as the auctioneer and buyers should expect that.

Makes sense. So the auctioneer has to kind of read the room and they make that ultimate judgment call whether it gets accepted or not. Yeah, correct. It depends on, like I say, all those factors, how many bidders, how the market's going, what the expectations are, what has sold around here. If we're in an area where every house around here is selling for at least $2.

5, but we're happy to start the auction at $2 or $2. 3 just to get it going, and the next bid's $10,000, you're probably not going to take it. You're going to be looking at $50,000 at that point to get some momentum and get to where we need to be. So we're within the realms of reality, I suppose. Yeah, 100%.

What's the smallest bid that you've ever taken then? Well, we're kind of the opinion that $1,000 is generally the smallest. Once you start opening up to anything lower than that, again, from a time perspective, it's not productive. And it's very rare a bid smaller than a couple of... Even $1,000, it does buy the property, but generally $500 is not going to knock somebody out.

I say it at my auctions all the time. I understand you want to pay as little as possible. You want to pay the smallest amount more than the underbidder. We all have that mentality. I understand it, but it rarely actually wins you the property.

It's so rare you're at $1. 356 million, $1. 356, and someone goes $500 and someone's going to go, okay, I'm out. That knocked me out. So that's why I encourage people to go, look, at that point, once it's getting down to those nitty-gritty bids, the $1,000s, $2,000s, one big $5,000 bid or $10,000 bid will often buy it.

And if you do small bids, you keep them in it. In terms of the lowest I've ever had, I actually remember I had a buyer's agent kind of give his hand away. It was a property, it was just under a million dollars, and we were sort of around the $993,000 mark, $994,000, and we're creeping up in ones. And I kept urging everybody, just go to a million. A million is probably going to buy it.

And he yells out, oh, I can't do a million because I've done an authority, and the most I can give you is $999,900. And I said, well, can you just do the million? And I made a joke about him chipping in the other hundred. He said, no, I can't do it. So then the other bidder just goes, I'll go a mil in that case.

And he bought it for a mil. That was the final bid. There was only two bidders at that point. And so I didn't technically take a $100 bid, but he kind of said that that's what he would go to. And the other bidder heard it and just went, right, in that case, sure, a mil.

Because he knew it would buy it. So as I say, it wasn't really technically a $100 bid, but he kind of said what he would do, and then this guy just trumped him with $100 more, and he ended up buying the property for exactly a million. That's interesting, I think, in terms of strategies. I'm definitely not doing that. I know, as I said, I understand the psychology.

We all want to pay as little as possible, but it's, I mean, I've gone up $150,000, $200,000 in $1,000 bids. Wow. $1,000, $1,000, $1,000. That would have taken ages. Oh, it took forever.

I'm in a suit, it's 40 degrees, and out there dying. But yeah, as I said, the small bids aren't generally the best way to buy it. It's so often just one big bid, because the mentality for the other bidder is that it's $1,000. I'll go $1,000 then. And suddenly, if someone did a $10,000 or $15,000 bid, $100,000 to go, they probably would have bought it.

You end up sort of going up another $100,000 because of the stubbornness of wanting to just pay as little as possible. Yeah, it makes a lot of sense. You do that big push, and then people will just psychologically think, oh, that's a lot of money. Maybe not $1,000. Yeah, that's all right.

100%. So Paul, it kind of sounds like there's a lot of different interesting mistakes that you can make, whether you're a person buying your home or whether you're even the buyer's agent who you can slip up and give a little bit of information that you're not meaning to. What are a lot of common mistakes that you see that lead to people missing out? I think the biggest thing people do is that they do due diligence. They turn up to the auction.

They're ready to buy, and then they sit back. We spoke about strategy earlier about whether you want to get engaged early on in the auction or later. And again, that's fine if you want to wait. But I think when buyers turn up and they don't have an idea about pricing, I think you should turn up to an auction with an idea of what would be a bargain price for this property, what would be great value, what's probably fair and in line with what's selling, and maybe a little bit more that you would stretch to for this one because you love this one. It's got the pool or it's got the land size, whatever it may be that you're emotionally connected to.

You should probably have those three prices in mind. And at the very least, if the auction's sort of slow to start, no one's bidding, everyone's sort of saying, oh, I'm going to wait, I'm going to wait and see, well then at least throw out that bargain price. At least throw out something that you'd be really happy to pay for the property. Because when people come to auction and they don't bid and they wait for other people to bid, it's almost like they require that social proof. And I get that.

We all want to see other people bidding to feel better about it. But if you're turning up and only bidding because someone else is bidding, then I don't think you're quite prepared to buy that property. I think you should turn up and have a really good idea and know what would be a steal for this property and at least be willing to start there. Because what happens is if we don't sell the property at auction, on the auction floor and we pass it in, you end up having a negotiation afterwards. The agents want to get the property sold.

The vendor wants a result on auction day. It's still auction conditions for the balance of the day. So it's still probably going to be those same buyers who are at the auction, maybe one or two who couldn't be there or who are waiting to see what happened. And then you end up having kind of an auction after the auction. You're getting an offer and you're shipping it around to everybody and you're saying, oh, okay, now these guys are at this price and you're wondering, oh, are they really?

They didn't bid, wondering if it's there or not. The beauty of auction is that it's transparent. You can see what everyone's willing to do. If you make an offer and you don't buy the property at auction, you'll get the first opportunity generally after auction to buy it and see the reserve price. It's not a legal obligation.

It's just something, a courtesy that the agent will generally afford you. So turn up and make a bid, get involved, show the agent, show the vendor that you're serious and you want to buy the property. People who want to sit back and see the property passed in and then go behind closed doors and negotiate, I don't think that's the right way to go about it. I think you're there to set up your family for the next 10 or 20 years or buy your next investment and you should show everybody there, both the other buyers and bidders and of course the agent and vendor that you're serious. So what you're kind of saying is if you are in that auction environment and it is something that you're interested in, just go for it.

You're not really actually going to get a potentially better result behind closed doors. 100%. Yeah, exactly right.