Rule 6. Do not bid too soon

The most important rule at an auction is NEVER BID UNTIL THE PROPERTY REACHES RESERVE. Until then, it is not for sale and it makes no sense to bid on anything that is not for sale. No matter how much pressure you receive, do not play into the agent’s hands by bidding too soon.

Dummy Bidding

Agents are so desperate for early bidders, they will do anything to get the bidding up from its low beginning.

Some will plant dummy bidders in the crowd. Or pay ‘dummy bidders’ to pretend to be buyers. Others will just ‘pull’ bids from walls or trees. This is fraud. It is justified by the use of a thin legal line known as ‘the vendor’s bid’, which means that a seller has the right to bid on their own home provided that the auctioneer declares this – which is almost never done. Even if the auctioneer does declare the vendor bid, ‘dummy bids’ are never declared.

The television program, Money, once did an expose` on dummy bidding. Hidden cameras filmed an agent boasting how he paid dummy bidders. Later, a reporter asked him if he ever paid dummy bidders. His answer was “No. Never”. The TV program showed two scenes – one with him proudly describing his deceit and the other with him denying it publicly.

Dummy bids are a central part of the auction system, despite the denials of agents and Real Estate Institutes.

But dummy bidding stops once the home reaches the reserve price and is ‘officially’ for sale. And that is the only time you should bid.

The Reserve Price

The reserve price is the lowest price the agents have been able to ‘crunch’ sellers into accepting.

And this is where auctions really favour you as a buyer. You will know the sellers’ lowest price, but no-one knows your highest price.

With the attention on the sellers’ lowest price, buyers save thousands at auctions.