Real estate auctions can be very stressful but also extremely exciting due to the potential for a tremendous profit margin. Many real estate investors are hesitant to get involved with tax deed auctions and the county foreclosure auction, because they feel like they lack the knowledge required to actually place a winning bid. But in reality, you don’t need loads of experience to come out on top; investors just need a well-architected real estate auction bidding strategy.

What Makes a Winning Real Estate Auction Bidding Strategy?

Winning a Florida County Foreclosure Auction requires a solid understanding of buyer psychology and how auctions tend to progress over time. PropertyOnion.com chatted with two very experienced real estate investors: Dan Henley, of Cape Coral, FL, and Mark Williams of Weston, FL. Over the past decade, Henley and Williams have acquired a combined total of nearly three dozen pieces of South Florida real estate at public auction.

“I’ve refined my approach to the point where I win about 75 percent of the auctions I bid in. For me, it was a process of research, trial and error,” Williams said. Henley added, “I was surprised at how much insight I gained by simply observing the auction process in the areas where I invest. So that would be my first tip for any investor who’s looking to get involved in auctions. Watch and learn from the other bidders.”

Williams and Henley offered these additional tips to help you craft a great real estate auction bidding strategy:

Avoid getting into an early bidding war.

“Early bidding wars are pointless, as they drive up the price unnecessarily. The seller is the only one who wins in an early bidding war,” Henley cautioned. And he’s right. You may win the battle, but a majority of bidding activity happens in the last hour of a county foreclosure auction, so there’s still a good chance you’ll be outbid. Those early bidding battles won’t give you an upper hand, so it’s wasted energy and potentially, wasted money if you drive up the price significantly.

Come up with two bid figures.

Henley recommends coming up with two figures after you’ve researched the property: a competitive price that represents what you’d like to pay and a price that represents the absolute maximum that you’ll pay. He keeps these two figures in mind while bidding, only resorting to the higher figure if it appears that the “like to pay” price will be insufficient to win. Williams added, “Always do your homework and run the numbers well in advance of placing a bid. This is a business decision and if you forget that because you get excited during an auction, then you’re going to lose money.”

Don’t bid until the last moment.

“I almost never bid until the last minutes of the auction. You’d be surprised how often people get complacent, assuming they’ve won,” Williams explained. Both Williams and Henley use the same strategy, waiting until the last minutes to place a bid that represents their maximum. Henley added, “This also helps you avoid a scenario where you get wrapped up in the excitement and place a bid that exceeds your budget. So it’s a great tactic if you tend to make bad decisions when your adrenaline level rises.”

Learn as much as you can about the auction community.

“Take some time to get acquainted with the auction community as a whole in the area where you’re looking to invest,” Henley advised, adding, “You can gain lots of useful knowledge by simply watching other auctions and how they tend to unfold. You can get a good feel for how aggressive the other bidders are in a region. I’ve also found that some areas tend to have almost all bidding activity in the last minutes and seconds of the auction, while this may be atypical for another area. You’ll get a good feeling of what you’re up against by just watching a few auctions and how they unfold.” Henley does recommend placing greater weight on the auctions for properties that are similar to the properties that you’ll be bidding on. You’re most likely to see the same bidders competing for properties that are similar in terms of property size, city/town and so forth.

Henley even keeps notes on each region where he routinely takes part in county auctions, but noted that it’s important to remember that the landscape in a particular community will change and evolve over time. That’s because investors are routinely expanding into new and different areas, so it’s wise to take some time to observe auction activity if it’s been a while since you’ve done business in a particular region.

“Take advantage of any and all information that the bidding portal provides. It varies dramatically from region to region, but some places will provide with useful data like number of bids, number of bidders and even anonymized bidder IDs.”

Check your email after the auction.

“If you lose an auction, not all hope is lost because some counties will offer the property to the second highest bidder if the winning bidder fails to pay by the deadline,” Henley said. And he’s right. Each city or county is somewhat unique in this regard, but many will offer a property to the second highest bidder if the bid amount is close to the winning bid and the winner fails to pay in the allotted time frame—usually, 24 hours. “I’ve acquired a couple properties this way. And I also missed one because I didn’t check my email in time. That’s a mistake you make only once!”

This last bit of advice also underscores the importance of ensuring that you’re ready to pay in cash or another acceptable payment method within 24 hours of the auction end. Otherwise, you risk losing your claim to the property. Contact the city or county clerk’s office and verify what payment methods are accepted and if you’re going to miss the deadline for any reason, inform the clerk’s office immediately. They’re typically far more willing to honor a late payment or refund your deposit if you’re honest and straightforward.

First-time bidders must also understand that you can’t simply register with the auction portal and place a bid. You’ll typically need to place a deposit with the county or city clerk in advance. This deposit generally represents 5% of your maximum bid amount. This sum will be applied to the purchase if you win. If you lose or decide not to place a bid, then you can opt to get the money refunded or simply allow the city clerk to keep it on-file so it can be applied to a future auction.

With these tips, you’ll be in a great position to develop a winning county foreclosure auction bidding strategy; one that will give you the ability to acquire properties at a price that allows for plenty of profit. Just be sure to keep your cool, perform plenty of research and approach the auction as a business opportunity. Don’t allow excitement or emotion to take control or you could find yourself with a winning bid on a property that proves to be a financial loss.