25 Jun Make bidding at auction fun – Haesley Cush
We get some tips for auction bidders from one of Australasia’s most skilled and entertaining auctioneers. We discuss the changes that have taken place and how and why auction buying can be a lot of fun and a great way to get a property on your terms.
Kevin: Haesley Cush is a second-generation real estate agent, having worked in the industry with his family for many years and now owns and operates his own office and, as well as that, is one of the most recognized auctioneers in Australia, having appeared on The Block and taken out many auctioneering competitions in Queensland.
I caught up with Haesley and asked him whether he could give us some tips for anyone looking at bidding at auction this weekend.
Haesley: Okay, tips for buyers: firstly, you have to know the property you’re about to bid on and you have to know the rules of the auction – really fundamental things. Property is research local prices so that you’re comfortable with the price that you’re going to pay.
Kevin: I went to a Ray White auction a couple of weeks ago, or it might even have been last week; I can’t remember. It wasn’t quite as formal as it used to be. It’s become very casual, even with the conditions. “Conditions are on display. I’ll quickly run through a few for you.” But we used to go very formally through those conditions.
Haesley: Yes. We just found when you’d read through all 20, you’d then have to go and wake everybody up because it was so bloody boring. People don’t need to hear them. They’re there to bid. They have all the paperwork they need. Terms of auction are on display. We hit a couple of the main points: you have to be registered, let them know about GST, explain vendor bids, all that sort of stuff.
Kevin: Explain vendor bids because that is interesting.
Haesley: A vendor bid is basically… Let’s imagine you’re a buyer who made an offer of $800,000 and the reserve is $900,000. You turn up to the auction, I call for an opening bid, “Bid it off at a start,” and you think “I might kick things off. I’ll open it at $500,000.”
I have two options as the auctioneer. I can say, “Sorry, Sir. $500,000 is too low, “and then you and I have a bad experience together. Or I say, “Sure. I’ll welcome your $500,000, and let’s run in $100,000 rises to take us to $600,000.”
Now, if nobody else bids, it’s kind of the end of the show. You didn’t expect to buy it for $500,000. We’re a long way from the reserve. So I place a vendor bid at $600,000, which is our way of saying, “You’re not going to buy it for $600,000. We’re still traveling in $100,000s. Will you bid $700,000?” You’ve already offered $800,000, so you say, “Sure. I’ll bid $700,000.” I’ll take a vendor bid at maybe $750,000, again, in the absence of someone else bidding.
Kevin: I just want to stop there. That’s something I can read into the auction straight away – that we’re getting close to a selling point, because you’ve slowed down. You’ve gone from $100,000 back down to $50,000. So, that’s something you can read into the auction.
Haesley: Yes. If you think of bidding like a triangle, the chunks get smaller as we get higher. Usually that’s from buyer pressure. And in the absence of buyer pressure, I have to try to read “Well, if I take $800,000 from a buyer who’s offered $800,000 before, they’re not going to bid again.” So I need to place $750,000 to take their $800,000. So, now they’re back at the level they were at before, and now we’ll see what happens from here.
Kevin: And they might come back at $775,000.
Haesley: They might come at $775,000, and I’d probably take maybe $780,000 to try to keep moving.
Kevin: I want to talk about vendor bids, because I think a lot of people probably would be listening to this and saying, “That sounds so unethical that you as the auctioneer would place a bid,” but in reality, it’s no different from any kind of negotiation, where if you make an offer on a property, the agent will take that into the seller. The seller will counter sign it.
Haesley: And people think it’s a bit foreign because they want to see competition at an auction. But the alternative is “Okay, we pass it into you at $500,000 and that’s the end of the day.” They’ve gone to all of the effort to turn up to bid at the auction. No auctioneer would ever place a vendor bid anywhere near what the owner would accept. This is not about pushing buyers above where they…
Kevin: It’s too risky.
Haesley: It’s just about creating a level platform and then beyond that, leave it for the open market.
Kevin: Because every time you place a vendor bid you’re actually buying it back on behalf of the owner.
Haesley: Effectively it’s called a vendor bid because the vendor is saying “I’ll bid at that price and I’ll keep it.” This is their way of saying “At that price, I would buy it.” And then their next bid comes. “Okay, no better bid on that? Okay, at that price I’d buy it.”
People who are familiar with auctions quite like vendor bids because it’s the vendor playing their hand as where they won’t accept. People who aren’t familiar with auctions find it really bizarre and really foreign. But as soon as that property’s passed in, they’re not going to find it bizarre that the owner says “I want $300,000 or $400,000 more.”
Kevin: In a way, what we’ve done by making vendor bids public – in other words, in the old days, we used to be able to pull them off trees and no one would really know whether that was a real bidder or not – at least today for the buyer, if you nominate a vendor bid, you know exactly where you are in that buying process. You know “That’s a figure that they won’t accept. I need to go higher.”
Haesley: Yes, that’s right. For a buyer looking for tips, they can look at how vendor bids work.
There are two strategies with an auction for someone bidding today. Remember that competition is what fuels the higher price. The lower you start, the more people can afford it, subsequently the more competition you’ll have. The higher you start it, less people can afford it, there’s less competition.
When I bid personally, I work out my maximum price, and I launch my opening bid very, very close to that to try to kill competition. Very few people take that advice because they worry that that bid will be more than the owner accepts.
Kevin: It’s almost like a king hit. It’s never as high as you’d go, but it’s getting close to it.
Haesley: When I’ve done it, because of how comfortable I am with pricing, I just go with everything I have and if it buys it, great, and if it doesn’t, I just leave. Very few people take that tactic so what makes them feel more comfortable…
Kevin: Has it worked for you?
Haesley: It hasn’t, no. Because I’m a little bit too conservative on my pricing maybe when I’m trying to buy.
Kevin: But that’s the thing. You have to go down a few dry gullies, don’t you?
Haesley: That’s right.
Kevin: That’s a great lesson for buyers: to set your limit and lock into it.
Haesley: Yes. You have to kiss some frogs before you get your prince, Kevin.
I think it’s so joyful. Auctions are so easy – no paperwork. “That’s my bid. Do you want to take it?” “No.” “See you later.” There are auctions where I haven’t used that strategy previously. I get caught up in bidding and I do quite like to bid.
And the other strategy is you get to the benchmark first. So if you’re in a bidding battle, people tend to think in round numbers, so you want to get to the next round number first because that is likely or could be their limit. So if you’re at $451,000, get to $460,000 because maybe they said, “We’ll go to $460,000 and no more.” If they bid $461,000, get to $470,000 because that could be the limit. Try to get to the benchmark.
Kevin: We have about a minute to go. There’s one other point I want to make and that is that if you’re going to go to an auction today or even next week, make sure you find out who the auctioneer is, and then go and see one of their auctions and understand how they work before you actually go and go toe to toe with the auctioneer.
Haesley: Usually the agent will be able to give you examples where they are.
A big thing that I want to leave people with today is get pre-approved. Go and see a broker and understand how much you have, because by being pre-approved, you can make what we call a cash offer, and a cash offer can help you buy a property a little bit better.
Kevin: I want to thank you very much for giving us your time today, Haesley. I know you’re very, very, busy. It’s great to see you in the studio. You’re welcome any time, by the way. We’d love to have you back.