04 Apr Set a bidding strategy to suit the market – Steve Jovcevski
Do you have a bidding type? Whether it’s strong and silent, loud and aggressive, or piping up at the last minute with your strongest bid – having a particular bidding style may not always play in your favour according to Steve Jovcevski from Mozo. We talk to him about why different markets demand different bidding techniques.
Kevin: Auctions more and more are becoming the way for people to buy and sell property all around Australia. It’s always been very strong in Sydney and Melbourne, of course, but we’re seeing in other parts of Australia that the auction process is really gathering pace. So, how do you prepare for it? What should you be doing when you get there?
We all know about making sure you’ve got the price structure right, but it’s the actual bidding strategy, understanding how the auctioneer works. Let’s dig a little bit into that, find out maybe a couple of strategies you might want to employ. Joining me to talk about this is property expert from Mozo, Steve Jovcevski.
Steve, tell me what you would advise someone maybe going to an auction this weekend, how they should be preparing for the bidding and what sort of homework they should put in before they get there?
Steve: The reality is no auction is similar, so be ready to change up the style based on the mood in the room. Basically, depending on the type of auction, if it’s somewhere where there are three or four really active bidders, a different style may be better than where there’s only one bidder. We could probably talk about the different styles, but we found that everyone has one or a couple of different categories of style, one of them being strong and silent.
What’s good about that, with a smaller number of bidders in a neck-and-neck auction, a strong-and-silent bidder who pipes up occasionally with sizeable bids can really throw off the competition and pose as an intimidating figure. It shows that you’re not bothering with back and forth with other bidders; you’re here to buy and you have the big numbers to back it up. That’s one of the more interesting ones that we found can be quite effective.
For example, if there are two people going really at it with $1000 bids or pushing along and there’s this one person who puts in a $10,000 or $15,000 bid every so often, quite often, that can often be effective to knock the other two out of the competition.
There’s another one. It’s funny; I spoke to a prominent Inner West auctioneer once and asked him his advice on what the best bidding strategy is. He said “Well, why doesn’t everyone just come in with their best bid at the beginning, what they’re willing to pay and that’s it, and then walk away?”
I thought maybe he just didn’t want to do the work of doing the bidding, but he has a good point in that opening with a big splash – so if the bid’s opening at $900,000 and you suddenly say $1.1 million because that’s what you want to pay for it all or close to it, and basically knocking the other guys out of the competition by doing that. And quite often, that can be effective as well.
Kevin: I’ve seen that work brilliantly, but you have to be right on the mark, haven’t you? You almost have to go to the point where “Well, this is the figure I’d pay for it” – the example you gave there was $1.1 million – because you then can’t come back. You could probably come back with $50,000, but the moment you do that, you’re indicating that maybe you’re going over your mark, and that strategy wouldn’t work.
Steve: That’s exactly right, so hopefully you’re knocking out the competition and thinking “This guy’s going to keep going.” But you’re right, it could be that they think “Well, hang on a minute. If I only put in a couple thousand more, he’s not going to go any more.”
But the other thing is you could pay too much for it. It may not have ever got to that point, especially in the quieter market the way it is in Sydney at the moment.
Kevin: What about the loud and brash person? How do you feel about them?
Steve: I think they can be quite effective. Basically, as soon as someone’s made a bid, they come back very quickly and don’t give the other person time to react. So, if someone says $1,050,000 they come back $1,055,000. And then they go again, and it’s just a constant barrage. They’ve come out with all guns blazing, and it seems like they’re determined to get the property no matter what.
Kevin: Agents and auctioneers love those kinds of bidders, because they’re the bidders who will actually take a property up to a premium.
Steve: Exactly right. The problem with this – and this is where you have to be careful – is if there’s more than one person doing it. If there are a few people doing it, it kind of gets lost. Like a horse race, often those who charge ahead at the start can find themselves outshone by the later players.
Again, you just have to gauge the mood in the room. It could be quite effective if you’re the only one. If you’re one of three who are doing it, then it may not be so effective.
Kevin: How powerful is it to get a buyer’s agent to do it for you? In other words, you don’t really identify who you are.
Steve: We call that the invisible bidder. And it doesn’t necessarily have to be a buyer’s agent; it could just be someone bidding on your behalf. But it gives you that air of mystery and intimidation. You can spook other bidders.
When they see someone smartly dressed talking on the phone, it gives license to the imagination of other bidders. You could be a cashed-up property investor or a property mogul who’s too busy to attend the auction.
There is that intimidation, that air of mystery, and it could work in your favor. But the problem is if you’re not at the auction… It’s fine if it’s a buyer’s agent, but if you’re just getting someone else to bid on your behalf it’s hard to gauge the feeling in the room and whether your strategy is actually working.
Kevin: Yes. It must also be very hard if you’re bidding over the phone, because you can’t really sense what the mood is; you can only take it from someone who’s on the phone.
Steve: Exactly, and that’s the problem.
Kevin: What about bidding in odd numbers, Steve?
Steve: I’ve seen this happen. It is a bit off-putting for the auctioneer especially who might sometimes get confused. This works well, I think, when you have someone who’s maybe a loud and brash bidder who’s coming in every second as soon as someone else makes a bid, just to slow things down.
Because with the odd numbers, the auctioneer sometimes may have to write it down. So, $1,558,352. There’s that period where they’re so confused they actually have to get someone to write it down for them and repeat it, so that slows down the bid and quite often takes the loud and brash guy out of his strategy and puts them off.
That can be effective. Sometimes, though, it can be a bit frustrating for the auctioneer. And as I said, it just depends on the mood. But what you don’t want to do is upset the auctioneer too much and he starts to move forward with other bidders who are making normal bids and not paying as much attention to you. And I’ve seen it happen.
Kevin: I have too. Yes, you can actually upset the auctioneer.
Steve: That’s right.
Kevin: Well, there you go, a very good rundown on what you could do this weekend at your auction. Steve Jovcevski has been my guest, and Steve is from the home loan comparison site Mozo.
Thanks for your time, Steve. If you’re going to be bidding this weekend, all the best. I’d hate to be bidding against you.
Steve: Yes. Thank you very much.