Hi,
Has anyone ever won a bid at a auction using this method ?
House is worth 280,000
Lets say bidding would normally start at 120,000
But you " the smart bidder " starts it off at 175,000 to “scare” enough people at the auction but low enough to acquire the property at a price that makes sense and will potentially make you money ?
( I know there are a lot of variables in this example but I’m more interested in the " mind set " of people )
Has anyone ever done this before ?
I’ve never used it on a house, and it’s effectiveness could be questioned.
I would guess that unless you are right at the price in which you will not increase your bid, someone else will bid just because you were quick to bid.
It might be a good way to get someone else hung on the property, but I wouldn’t suggest it for a property you actually want to make money on.
Why not ? I think its a good method
I’ve attended dozens of foreclosure auctions/sheriff’s sales in my neck of the woods and my experience has been there are a core group of bidders who buy the great bulk of the properties at the auction. They are not scared off by anything other than overbidding their target price.
These guys usually let the amatuers bid up a price untill it ceases to be the “steal” the amatuers expected it to be from attending a seminar or reading a book and then they will bid up to their highest target price. 95% of the time the amatuers drop out and the serious bidding is between the members of the core group. They drop out one by one until the highest bid is reached.
I know my market reasonably well and sometimes I can’t believe the high prices these guys will pay. I’ve only been a successful bidder once and wound up paying about $30K more than I really wanted to for the propertry.
jmd_forest
That’s a different way and I have never done it done way. What I have done is make sure that you know this property’s history inside-out! Your objective is not just to win the bid. But you need to win the bid where you got it with the most profit. What’s the sense of winning it and you lose your tail later on?
I don’t think it will scare the experienced people. If your numbers say the property is worth 280k and it IS, then their numbers will say that too. The alternative is that it’s worth LESS, which means they will stop bidding a the right point…OR it’s worth MORE, which means they’ll bid higher if they have to.
Either way, you end up in the same spot. The people who know the value will bid what their numbers are. After that, they stop. All you do up front is just get to a higher price faster.
In my area, houses can sometimes be purchased at a large discount at auctions. As jmd said, there is a core group (REIA members and a couple of realtors) who buy many of the properties. Their bid will not be affected by any psychological tricks.
I usually refrain from bidding until the bidding stops and the gavel is about to drop. Then, if the bid is below my maximum price, I begin bidding. All I care about is whether I can get the property for less than my maximum bid. It is all about the numbers!
Having said that, there is absolutely no harm in trying your experiment. It certainly can’t hurt anything. Give it a try!
Good Luck,
Mike