Don't Go all in at the Start of the Auction!
Topic: Bidding, Strategy, How-To, Foreclosure Auction, Tax Deed Auction, article by Tony Stern
A common misconception for those new to the county foreclosure auction scene is to go ‘all in’ at the beginning of an online auction, meaning you submit your maximum bid at the first time of asking and wait to see whether you win or not. Although it’s tempting to just jam in your highest and best bid after you’ve spent many auctions going back forth for an hour in $100 increments, this isn’t the best strategy.
Emotionally Bidding on a House Auction Kills Profits
Many people bidding in the Florida County Foreclosure & Tax Deed auctions are inexperienced and/or are prone to emotional bidding given the right trigger. The right trigger for many is when they spend time and resources researching a property and within 30 seconds of the auction opening the bidding is already just above the maximum bid they calculated after hours of planning and consideration. Their emotional brain screams “I’m not losing this one, I spent too much time on this, and I want it” and it kicks on the irrational centres of their investor “Got to get a Deal Today” minds, and they start justifying overspending to win this property. They now have the entire auction period to make these justifications, and after 15 minutes or more and some phone calls, they jump in again and bid the property way up into the stratosphere of the “no profit zone”. No one wants that. No one.
Try this House Auction Bidding Strategy Instead
At the beginning of the auction look to see what the highest bid is on the property you are tracking, If you feel the value is there and it will beat the current bid, up the bidding by between 60% to 70% of what your maximum bid is going to be and stay there until the last 5 minutes of the auction even if you are countered and are now not the current leader.
On the 5-minute mark, push up your bid to 80% of your predetermined maximum bid and see if you retake the lead.
At this point, you will either stay there or be countered and no longer be the leader.
With 30 seconds left and assuming you are not leading the bidding, place your maximum bid.
If you have retaken the lead now, you have either broken your opponent/s spirit or will restart the bidding, usually at lower increments.
You have a decision to make, quickly evaluate how much more you are prepared to pay to win the property or simply bow out gracefully. Don’t get emotional! This is a business transaction, and if you overpay and win the auction you still lose!
If you decide to stay in, with 15 seconds to go submit a bid of 50% of the extra amount you are prepared to pay to win the property, if that provokes a counter bid that puts you into a trailing position you are now dealing in seconds and this is where a fast internet connection and absolute concentration is necessary.
The clock at the end of the auction is reset to 60 seconds whenever a new bid is received within the final minute, so with 10 seconds to go submit your final bid.
Why Does this Auction Bidding Strategy Work?
This strategy takes away time needed by your competitors to convince themselves to bid more than they were prepared to bid to begin with. They have no time, and if they are rational investors or have a smaller strict budget to buy Tax Deed or Foreclosure properties with, you will be able to bid more without ending up in the dreaded “no profit zone”. You end up winning properties closer to your maximum bid in most cases using this method.
There is no guarantee of course that this strategy will win you a property at auction every time you employ it, but at some stage, you will find success because you did not go “all in’ at the very beginning which has proven to be a poor tactic historically for this author.
- Happy Bidding!