Auctions aren't that scary

(upbeat music) - Fine house is hard. - Yep, you can really suck out there for a lot of people. - People might only be doing this once or twice in their lives. - House only can feel like a full-time job. - It's like the real estate hunger games out there for some buyers. - Remember, the house is the win. - Hello and welcome back to Taking Back Saturday, a Happy Buyers Club podcast. I'm your host, Chase Jones, and joining me, as he does every week, is real estate genie, Sam Hunter. How are you? - That's topical 'cause I've been listening to the Aladdin soundtrack all morning. - Oh wow, what an inspiring way to start your morning. - Exactly right, man. You know what my favorite part about this episode is? It's the excited way you start. Like, it's the sort of projection in your voice. You're just like, man, I'm ready to go. Let's do this. - Yeah, and I didn't even listen to the Aladdin soundtrack this morning. - That is hands down, probably not the greatest way of starting your day. But I'm gonna have a friend like me stuck my head all day today. - It's a whole new world. It's good. - A whole new world. - Today, we are talking auctions. - We are talking auctions. - And everything about auctions, auction theory, auction strategy, the emotion of auctions. The reality is that in the current marketplace, auctions are becoming more common, I think, in the Brisbane market, particularly. And it's something that buyers have to be aware of, how to handle them, how to prepare for them, and how to execute at auction or before auction. When you're talking about emotion around auctions, how does an auction campaign differ from a standard private treaty campaign? I mean, the emotion that sort of surrounds it. - Good question. - Well, I'll tell you what, I'll take it from the top, because I think that a lot of people are intimidated by auctions. What they see auction against an advertised property and immediately they're like, oh, that's gonna be tough. Yeah, that's gonna be a hard campaign. And not everyone is in a position to participate in an auction, being where they can't offer under unconditional circumstances. So with that in mind, for those that potentially can't, let's start with that, for those that can't participate in an auction, what would you recommend a way to approach that campaign? You see a property advertised potentially on Thursday or Friday, and it's got auction against it. Do they just put a line through it? Or is there a way for people to still purchase when it's going to auction? - I don't think they put a line through it. I think it's important to say potentially, auctions are really scary. And that's kind of a Brisbane thing. So auctions traditionally, until maybe the last sort of five or six years were maybe only 20% of the property that was sold in Brisbane any year was taken to auction. It's now probably closer to 60% and growing. So as a market, we've grown up a bit. And if you're a buyer and you see something going auction, you have those emotions of like, fuck, not again, like this one's going to go through the roof, we won't be able to afford it. I don't even want to do my own research 'cause I know they won't tell me a price or they won't even give me comparable sales. So we'll just leave it. I'd urge you to reframe your relationship with auctions to begin with, because it is the most transparent way of buying a property. And we've got a client at the moment is going through a best and final situation where it is the exact opposite of that. We're happy where we are, but we have no idea where everyone else is. And we're at a point where if we buy it, we're going to be ecstatic. If we don't buy it, we're prepared to walk away because somebody is paid tooth and nail beyond what we would be prepared to pay to buy. At an auction, all that's out in the open. So you've got a choice about whether you want to pay that money or not. And if you do want to pay more than that, you don't have to beat it by a dollar. So there's none of this behind the scenes or you don't know where everyone else is. So I'd urge you if you're anti auction and it's a mindset, just think about it as a way of being able to actually understand the market in a really open and transparent manner. You don't get that opportunity with any other method of sale. The second thing I suggest is if for some reason you feel like you can't bid at auction because you can't offer an unconditional contract, go and listen to episode one of this show again, where we talk about having the right team around you because if you do have a good mortgage broker, then they will be able to put you in a position to bid unconditionally up until a certain point. And by that point is financially driven for the most part. And that is why so many more people are actually able to bid at auction and probably why 60% of properties sold at auction now is because there are a lot more mortgage brokers helping a lot more buyers at the moment. And people are getting organized earlier to give themselves the best shot at competing or buying in this transparent open environment. That just, for us, it's a lot fairer. We miss out on auctions all the time. - It does happen. - But it doesn't feel unfair. - No, certainly not. The emotion is still very much real. A man with a hammer shouting at everybody, it's enough to induce nerves in anyone. But that's just, that's part of it, isn't it? And regardless of whether you're a first timer or a 20th timer, those nerves are still there on auction day. But it's all about doing the right things and the lead up to that auction so that you can keep a lid on that and execute on a plan. So your question was, can if you can't offer an under auction conditions, should you just discount the property? And my answer was long-winded as they usually are. But the reality is you should definitely go and have a look at if you think it's gonna be the right house for you, if it ticks all your must haves. If you're compromising on, if the compromise on that property is the fact that it is going to auction, then see if you can get prepared. And if you can't still go and have a look to make sure it actually feels right and you think it's right for you, you could potentially try and make an offer ahead of the auction. But if it's a good real estate agent, they're not gonna look at an offer that has conditions on it. Anyway, that's the whole point of an auction process. - But think of this as well. There's two sides to that coin. If you see a property advertised and it is going to auction, don't immediately put that auction date in your calendar and think about it in two weeks' time. You have to be on the money throughout that campaign. You need to be completely aware of everything that's happening with that property because there's every chance there could be an option, option stopping offer placed in front of the seller or selling agent, and all of a sudden, you're finding out about that there's been an auction canceled. So it's all, it doesn't change whether it's a private treaty, whether it's an auction campaign property, staying in communication and constant contact with the selling agent is essential because option stopping offers do happen all the time. - You see them now like where, and again, this will be this part of the episode that potentially doesn't live on into decades, but the market we're in at the moment, you're seeing a lot of people who have already bought taking their home to auction because they need an unconditional contract within probably 21 days. Hot tip, if you see an auction property that comes on the market on a Thursday and the auction's in three Saturdays' time, there's a really high chance that that seller has bought elsewhere on potentially a 60-day settlement, not necessarily subject to sell their house, but they're just like, yeah, we'll put our place on the market and away you go. So they're gonna be under a lot of pressure. So three-week auction campaigns can often show you where potentially there is a deal to be done, not just on auction day for a good price, but ahead of auction, if you're in a position to make that auction stopping offer. - Yeah, we'll ask the right questions, confirm your suspicions. And if it's early in the campaign, like the first weekend, the afternoon after the first inspection, solve their problems. - Solve their problems. So you can show them an unconditional offer under auction conditions, as we would say, enough to make them think, well, this solves all my problems. We get to move into our new home and we don't have to sweat it out for three weeks. And trust me, sellers on auction day are just as nervous as buyers because they need the result potentially to make their next move happen. - Yeah, absolutely. - Before the big day, auction prep, auction strategy, it's something that we sit down and do with our clients when required, when we're going to an auction. An auction prep, a lot of it is just about having conversations with if it's yourself and a partner or yourself and someone else who's buying that property with you and coming to agreement about how that auction is gonna play out and probably more importantly about money because there's not a lot of other parameters within it. There's not like there's no conditions that we've got to sort of forward and back about. Realistically, it's about price, where we're comfortable and where our absolute limit is. Now, I know that you love the three price strategy. Can you run us through what the happy buyers have like three prices for an auction? - All right, I think that looked like overall. I think the message that we want to get across from this podcast is a great auction, a successful auction for the would-be buyer is all about the preparation. And it's the sort of work and how prepared you are prior to getting there on the day that puts you in the best stead to perform. And auctions are theater. So you have to think of it a bit like a performance and it's very hard to perform if you don't know your lines. So yes, there's a conversation to have around price but it's the conversation prior to that is, are we gonna register ahead of time, right? And we wouldn't say to anybody, register on the day. We always recommend to all our clients to get all your paperwork done ahead of time because the morning of an auction is terrifying, even if you are prepared, right? Emotions run really high. The last thing you want to be doing is like, shakily writing your name on an auction registration form and then picking up the paddle and then going stand in the backyard waiting. So before we get to the point of registration, you've got to understand, firstly, do you actually want to buy this house? That is the fundamental question to answer before you get any further. If the answer to that question is yes, we don't have to worry about the conditions that you're gonna offer because an auction is an unconditional contract. There is no cooling off period. There's no finance course, there's no building and pest course. Very rarely will there be any sort of special condition but you might see an extended settlement or something like that if someone really needs longer or shorter, right? So you don't have to think about that. All you have to really think about is the money. And that is the conversation that pays, pun intended, to have well in advance of the moment that you find yourself in. We were at an auction a couple of weeks ago where there was a couple that literally had their iPhone out doing calculations on their calculator app because they hadn't had this conversation. They didn't buy it, thankfully, because not knowing their story but looking from the outside in, they were well past where they wanted to be and they were kind of freaking out a little bit. So you've got to know your limit and your limit starts with what would you steal it for? Right, we talk about this price, the Hawaii price, market value and O ship price. The Hawaii price is a figure that you would be ecstatic to buy that home for. The one that you've bought it, you say to your buyers, agent, you say to your friends and family, "Hey, we've stolen this house from the sellers. "They must have been under so much pressure." And for some reason, nobody else bid and we bought it. How good, we're all gone to Hawaii, our share. No one buys houses. - This is like, whoa. - No one buys houses for Hawaii prices, right? But you need to know that because that might be where you open the bid. I'm not a big fan of really low opening bids. I think it just gives the auction a chance to get momentum. Momentum is not good in an auction campaign if you want to buy it from a buying perspective. It's great from a seller's and auctioneering perspective. Once you sort of understand where your Hawaii price is, then you sort of understand market value. And if you go back to the research episodes of this podcast, that those just following those steps, understanding comparable sales, talking to the agents who sold them, understanding the context and the story behind those sales, so you know how many bids there were, so you know how many offers there were, so you know if that price was fair or high, will help you understand what market value looks like for the home that you're hoping to buy, but definitely gonna bid on on the weekend. And then you get to that low ship price. And this is where I would suggest you and I add the most value to our clients. - 100%. - If we will sit with them and we'll say to them, "Okay, what's your airship price?" And they'll say, you know, number out of 10 and they'll say, "It's $1.7 million." - And I say, "Well, if someone bought it for $1.7 and $1, "would you be devastated?" - Obviously. - Well then. - This is probably not your airship price. And it is the price where you're driving away from that auction, whether it's on-site or in rooms, and you look at each other, and if you're saying, "Oh, shit, we would have paid more," then that has to be the number that you go to that auction with. Again, coming back to that first question, do we want to buy this house? If it is the home for you, if it ticks all the bust halves, if it's what you're compromising on as little as possible, then you have to have a conversation around what is the absolute last cent that we would be willing to pay for this property, and you need to write that number down, and you need to take that number with you in your pocket, and you bid as hard as possible to that number and not beyond it. - And it's about sticking to that plan. It's about not being, calculate a couple who are there madly doing the numbers. They're in front of everybody who can see that you're scranging together your last few dollars, the auctioneer who's going to pay to that as well, and that if the bidding exceeds the number that you have written down in your pocket, you can leave with no regrets saying, "Hey, they paid big money for that place." - Exactly, right. And again, when we say we owe our value to our clients, so I will sit there and we'll say to them, "Is this the home for you?" It's a really, relatively simple question to ask, but when you find yourself in this moment, and if you're listening to this show, just to like recap and have these conversations yourself, you'll know the feelings that we're poorly describing right now. You'll know that, "Yes, this is the one for us." And so having this conversation about would we pay an extra 5,000? Would we pay an extra 10,000? Would we pay an extra 50,000? Would we pay an extra 50 dollars? It's hugely important so that you are prepared on the day because that price informs all of your bidding strategy ongoing. And a lot of it comes down as well to, I think we just brushed over it there with calculator couple is his confidence. - Sorry guys, have you listened to this show? - Yes, sorry guys. I mean, I hope you guys have now found something and bought well. But going there, pre-registering, not standing there shaking as you're signing your forms, handing over your ID, always bring your ID. Having that number in your pocket, having a strategy in place, which you'll get to shortly and executing on that with confidence. Paddles high, loud and clear. It sets a tone. Everyone around you can see that you're like, "Wow, these guys are here to buy." They're not mucking around. They don't have second thoughts about what they're doing. And like I said, theater and also not intimidation, but to some extent you want to clear out the room. You want people to think, "Oh, these guys will buy at anything." "Oh, I might as well just put my paddle in my pocket." So that feeling that you can exude to others out in the yard or on the back deck wherever the auctions being hosted are real. And that's a big part of being prepared, having that formal pre-approval in place, confidence behind that number in your pocket and go out there and execute on auction day. - 100%, your point on pre-approval probably can't be overstated. It's all well and good sitting and having these like crucial conversations about what price you're be willing to get to, but make sure that that number doesn't exceed whatever your ironclad pre-approval is. And if you are going to bid at auction with the intent to buy that home, call your mortgage broker like the week of, and reconfirm everything, it will just build more confidence in the process for you. Like we talked to our clients a little time about being comfortable and confident with every decision that they're making, right? If they're comfortable and confident in that house, ticks of the boxes, it's worth going to the opener. If they're comfortable and confident that they had the right feeling for it, it's worth making an offer, it's worth registering for the auction and going to bid, right? You need to have those same feelings with your financial backing from whatever lender you're choosing and the broker that's facilitating that for you as well. So you just have those conversations. It will make a material difference to how you're feeling and the performance and the theater that you can portray and the confidence that you can portray and the discomfort you can offer other bidders when the day comes. - The reserve price that gets set, for those that haven't attended many auctions or any auctions, I would firstly recommend doing so, even though you're not participating. - It's way more fun. - It's always a spectator. If you're starting your house hunting journey, we can put an auction in the calendar on a Saturday, even if you're not interested necessarily in the property, but go and watch what happens. Just watch how people interact, how the auctioneer hosts it and you'll hear things about reserve price or is it on the market. How, well firstly, what is a reserve price, Sam? How are they set? When are they set? Give us the, everything you can probably give us some insight onto in reserve pricing. - Okay, so a reserve price is the lowest amount that a seller has indicated to the real estate agent, the auctioneer, that they will be willing to let that property go for. Properties sell above and below reserve prices all the time. It is usually the price at which an auctioneer and agent will call their property on the market, although there is no legal requirement if the reserve price is met for either of those parties to call the property on the market. So if you're that guy at every auction, that's like, are we on the market yet? Stop asking that question, dude. Like, and it is always a guy. - It's always a guy. - Yeah, like, you know, late 40s and up, just think any smart. Yeah, it can be on the market at any point in time. It doesn't actually have to meet the reserve price to be put on the market, right? That is a decision for the seller, the agent, the auctioneer, and they make that in the moment, depending on what the crowd's like, what the room's like, what the bidding energy is as well. So it's just the number. It's part of the process. You have to have a reserve price to start an auction. It has to be written. It has to be signed by the seller and the auctioneer. Does it mean that the property is going to sell for that price? No. Can they change that price? Yes, if you've ever been to an auction and your point of going and having a look at one important, it's way more fun to go on an auction when you're not putting your hand up than it is when you are. And it will just give you a sense for how to play it when your time comes. Yeah, if the auction is paused, which a lot of auctions do, particularly sort of north of two million bucks here in Brisbane, what will usually happen is the auctioneer and the agent will go and talk to the seller and they'll encourage them to put the home on the market at whatever the current bid is. Because when people know their cliche playing for keeps, I hate that language, but it's used by almost every auctioneer every Saturday in Brisbane. When they know that the home will be bought at the price that is currently with the highest bidder. It can spark activity. It goes a little bit nuts, right? Emotion takes over and people are like, "Oh, wow, we can actually buy this. "Yeah, we'll pay that extra thousand. "Yeah, we'll pay that thousand." So it comes back to know your price, right? So when that moment comes, you know where you're happy to get to and you get there ideally less than that, but you get there and hopefully bid everybody else out. So yeah, they'll walk into a room. They'll sort of, not necessarily strong on the seller, but they'll professionally suggest if the auction is paused, that perhaps their reserve is not able to meet the market and their best chance is to alter it to the highest bid, put the property on market and see where it takes us from there. That is a really good strategy when you're trying to sell your house. It's not a standover tactic as I've sort of described it from an agent. It is just a way to encourage more bidding 'cause people actually know they're gonna buy a property. Sometimes it happens, sometimes it doesn't. Sometimes you'll see an auctioneer go away and get instructions to call the property on the market 'cause they wanna officially get the seller to say, "Yeah, we're happy to sell it." It could be a hundred grand over there as the seller can still say, "No, we're not selling the property." It is their decision despite what number is on the piece of paper. So it is just part of the process. We always call an agent on a Saturday morning before an auction and be like, "Hey, you set a reserve yet?" They say, "Yes, we say what is it?" They never tell us, but it's a good call to make. And it also just reinforces that you're there to buy, not to bid. And what the agent will usually do then is talk to the seller that, "Hey, these guys are called. They're pretty keen." Because if the auction doesn't meet reserve or anything like that, you want them to call you first. So it's all just setting yourself up, playing to the process a little bit, just to make sure you're in the best position to buy it at auction, if you get the opportunity, or you're in the first position to get a phone call after, if it happens to pass in, so you can actually then privately negotiate, hopefully just one-to-one. - Yeah, we've said this on many episodes, I'm sure, about there's no point in playing coy. - Yeah, for sure. - Show that you're keen. Show that you're keen early in the campaign so that you don't miss out when the auction gets canned for someone else's nicked it. If the auction does pause and you're dragged into a room with agent auctioneer and yourself, you can negotiate at that point. Now, there is the room to sort of maneuver and negotiate to then to be put on the market and brought back out to the floor. Lots of things where being keen, being proactive, asking the right questions, having that constant communication with the selling agent, that rapport will help you on auction day. Introduce yourself to the auctioneer, that's another big one. We'll probably move into what on the day looks like now. There once opening bids, what it looks like, what it sounds like, but before that happens, go and say good-bye to the auctioneer. There is no harm in introducing yourself so that you're made aware to them, they know to look to you. And I think that is a really important thing because you don't want to be missed. Another thing is be loud, be clear, be clear with your bids. I know these are tiny, little things. - Make a difference. - They do make a difference. Any tips on opening bids or in general auction strategy? I know that what we do, that conversation that we have with the agent about reserve price, what we didn't say, is we also ask about how many people have preregistered because knowing how many people are potentially bidding can determine what the strategy looks like. Can you speak to the difference maybe between an auction with three or four bidders versus 10 plus, which seems to be becoming more and more common? - Particularly for those just box ticking homes in good suburbs. So I reckon every client with a bid or auction says to us, what are we gonna do on the day? And it sounds a bit unprofessional to sort of say, I'm not sure yet, but that's kind of the reality. There's no one way to play an auction. An agent will tell you bid first. If you bid first, you're a high chance of buying the property. It's because they want momentum, right? They want that train. They want those horses out of the gate going for it. What you wanna understand is who is making up the auction. What do they look like? How are they standing? Like what confidence and comfort are they exuding in that sort of performative arena, if that makes sense? - If there's an auction that's got, call it more than six, seven registered bidders. And we've got a pretty reasonable oh shit price in our pocket. And we literally write it down and stick it in our pocket as well if we're bidding on behalf of our clients. I like to open the bidding. And I like to open the bidding with a really strong bid because again, experience shows us that 50% of the people who are registered are hoping for a bargain. And they're usually the people that start with a really sort of low cheeky offer because they've kind of gone about it the wrong way. They're there to see if they can buy it low. And all they've done is give the auction momentum and it goes straight past them. And they're like, we missed another one. I hate auctions. I'm not going to another auction, right? If you're there to buy the property, coming back to the first question, do we actually wanna buy this house? If you're there to buy the property, put in a great first bid, right? That's if there's a lot of registered bidders 'cause you wanna suck the momentum out of the room, right? And you want it to be you and somebody else going toe-to-toe ideally to get to a point that starts to feel uncomfortable but is hopefully still well below your ownership price. If there's two, three or four bidders, then potentially see where people start, right? Because you can literally eyeball everybody at that stage. You're not sort of just left and right in trying to find everybody who's bidding in the crowd. You wanna get a sense for why there are only four people 'cause at other auctions you've been to, there's been 10, there's been 12, there's been 13, right? And just kind of feel it out, see where they start, is there momentum in the bidding? Where does it compare to where you were prepared to open the bidding as well? Coming in second or third or fourth in a bidding chain doesn't increase or lessen your chances of buying the property. What it does, and I would recommend this to anybody who is not the first bid, is whatever your first bid is should be an incredibly strong bid. So again, let's use one seven is where we think fair market value is. And someone's put their hand up at 1.35. That's the first bid, right, 1.35. The auction is probably gone. Thank you so much. We'll go up in hundreds from there, or they'll do a vendor bid at 1.45 or something like that, just to get it to somewhere that's not so ridiculous. And there's no rules about how low a first bid can be. I've been to an auction where someone has offered literally $1. 'Cause the auction, it was a market, it has a no reserve auction at 117 registered bidders. It's ballsy from the agent. They sold it for like 470 grand. It's probably worth 450. So it worked really well for Mrs. a long time ago, obviously, and very South Brisbane, like dirty South. But the point is there's no law about where you have to start. But if somebody starts low and the auctioneer comes in with a vendor bid, or somebody else comes in with a cheeky bid that's low as well and you're prepared to pay 1.7, go 1.65 and just get rid of them. Just like watch, it's like that Simpsons meme where you can see the moment that Bart Simpson's heart breaks. - No, it's Ralph's heart that breaks. - Yeah, when Ralph's heart breaks, as Lisa doesn't choo-choo-choose him. Yeah, you can tell we're millennials. Yeah, you will see the person who started earlier. If you come in at 1.65 and they were at 1.35 and there's a vendor bid at 1.45, they will just look at you and be like, "I hate you." - This is all around psychology. - Oh, for sure. - And I call those not necessarily knockout bids, but they're enough to knock out enough people. 'Cause that's it. Like you were saying, if we're in a big auction with 6.7 plus, that knockout bid that's sort of like, "Hey guys, I'm here to buy this. "I'm not mucking around. "I'm gonna take some people out of this auction "with one bid." And then same thing, when you've watched a smaller auction group sort of tat around, bang, that big increment jump, saying, "Hey, I could potentially have unlimited money." - Exactly. - As far as, you know that you don't, but they don't know that. And you need to give that impression to the room that you're here to buy and you could potentially buy at any cost. So knockout bids are really important. Another thing to talk about and agree on before the day is increments. I know this might seem trivial, but deciding which, if you're in a partnership, who's bidding? Who's bidding and how are they going to bid? Now, these are not, you don't have to live and die by this, but having those conversations ahead of time are really important because you don't want to be whispering and poking and prodding and, you know, "Oh, why did you do that?" Agree on it beforehand. Have a general strategy before the day. Assess the number of bidders that are gonna be participating in the auction. Have your oh shit price in your pocket and just go about bidding with confidence. Think about how you can potentially take people out of that auction and you'll go a long way to buying that property. - On your topic of increments, you get a sense for how far away you are from reserve price by what an auctioneer is willing in inverted commas to accept or not. So again, let's say you offer 1.35 and they're only accepting bids in $100,000, right? Now, you can bid whatever you want. You can increase it by a dollar. They don't have to accept your bid and they can legally say, "We'll only take 100,000 increments from here." Whether another bidder gives it to them or not is one thing, they can then do a vendor bid. If they want to, which is just the vendor saying, "We're gonna take it to 1.45" to show we're serious about selling, but that we're not gonna sell anywhere near 1.35 or probably anywhere near 1.45 as well. So the shorter the bids get, as in if it's 100 down to 50 down to 25, 20 to 10, whatever it is, that shows you that you are getting closer to a reserve price or pass it if you're on the market and ready to rock and roll. If the auctioneer is letting you make whatever bids you want, houses very likely on the market, even if they've not called it on, they will call it on the market before they actually do a first, second, third, final call and knock it down. But they'll often do first, second, third calls, pause, first, second, third call, vendor bid, whatever it might be. So don't think that the first time you're here, first call, second time, third time, means it's actually gonna sell. They'll do it any number of times during an auction process. - And every auctioneer is different. But that is a really interesting thing to note is that when you do see increments shortening, when they're starting to accept smaller bids, that might be the time to throw a knockout punch. - 100%. So yeah, if everyone's gone up in fives and you've got a reasonable amount of money and reserve TRO shit and you can go in at 15 or 20, you're just gonna suck the life out of the other parties and best chance of buying a house. - Yeah. Now, if a auction gets to a certain level where the bidding has stopped, the auctioneer has gone around the room asking for more, stared everyone in the eyes. The auctioneer goes away, speaks to the sellers and comes back where they're not willing to put the house on the market. It hasn't met reserve. They're not willing to lower that reserve price. There's every chance that an auction can pass in. In that circumstance, it means that everyone's walking away. There's no result. What is the typical process that follows after that? Is there a, is the top bidder given first right to negotiate on that property? Is it open slather? Does everyone hang around at the front to talk to the selling agent? How does that, well, how would we best take advantage of that situation if it was a property that we did want to purchase, but just not at the price that the seller was willing to sell for? - Okay, so before an auction gets the opportunity to pass in, you're probably gonna be pulled aside into like a bedroom in the house if it's on site or into a little side room with like a paneled wall if it's an in-room auctions. And they'll say to you, hey, we're not quite there yet. What can you do for us? The advice that I would give anybody who finds themselves in that situation is get everything you possibly can from the agent. What's the reserve price? At what point are they willing to sell? Give them nothing back and say, thanks for all the information. We need five minutes to talk about it and let the agent leave the room. Don't have a conversation with them there because in the heat of the moment, you give prices and you make agreements that probably serve the agent the seller more than they will you. You need a moment to slow down and think things through and make decisions that serve you guys. And again, coming back to do actually want to buy the house. So the good thing about being that party, if you get to a point of being pulled aside at an auction while it's under pause is they'll probably tell you the reserve price. They'll probably tell you what the seller is willing to accept. And you can have that conversation and make a decision about that. If we find ourselves in this situation, we actually pull our phones out and almost talk about it via a WhatsApp group so that no one can listen in. We're weirdos, we get it. But those private conversations make all the difference as and when you get the opportunity to negotiate if you're unwilling to meet the reserve or the vendor's expectations and you're prepared to see the property pass in. So fast forward back to your question. If the property passes in, it's just part of the process. A lot of property. And you'll see this with auction numbers that are reported on a Saturday evening at six o'clock. They'll give you a clearance rate in Brisbane. It's usually somewhere between 45 and 55%. That's pretty standard. If it's above 55, it's pretty banging. If it's lower than 45, you wonder, did the agents do their job? And were they just hoping that they were gonna get great prices? You will see that number change and always increase from Saturday night at 6 p.m. to sort of Tuesday afternoon at 5 p.m. Because there are so many deals that are done under auction terms and conditions which still makes the process successful between Saturday afternoon and Tuesday lunchtime. If a property passes in and you're the highest bidder, in every state in Australia other than Queensland, you get that first right to negotiate. So they'll come to you and they'll say, hey, this is what we're prepared to sell it for. Do you want to pay it? And you have the option of saying yes and no. Well, maybe, and talking about it. Until those negotiations resolve, they won't go to anyone else. In Queensland, it's Cowboy Central, Free For All. Yeah, somebody who's not registered for the auction, who's sort of passed in, could just walk up to the agent and they have a contract and say, hey, we'll pay them their price, but we need 21 days' finance or we need a building and pest inspection or we actually need 90-day settlement 'cause we have to sell our place 'cause we are silly and are buying before we're selling. So bidding at auction and it passing in doesn't guarantee you the right to negotiate. A good real estate agent will pull every single registered bidder aside and say to them, hey, you guys bid up to 1.6. The reserve was 1.7. We're gonna try and sell this tonight. What do you want to do? You can have whatever conditions you want. I'd still recommend that you do it under auction terms and conditions because it's gonna give you the best chance of buying a property, but just know that it is then behind closed doors. And you find yourself in a private treaty negotiation, at least you know however many number of parties may be interested, but you have no transparency on price and no transparency on conditions. If we have the opportunity to buy a property at auction, we will always do our very best to take it, even if it means having that text message conversation back and forth in a little room to try and increase a bid and get it done then and there because it is transparent because we know what the market is willing to pay and we know what we have to pay to actually secure that property because our clients really do want to buy it. If it passes in, you don't have any of that transparency. Yes, you can put your conditions on it, but you might end up paying 50 grand more than somebody else because the agent's told you that you're really close, but you just need to give us a little bit more to get it over the line. - Yeah, the curtains come back down, the transparency is completely gone. You know, you're just in a fast-tracked, high-pressure private treaty negotiation. - Yeah, wherever it's-- - With any number of parties. - Exactly right. And everyone's emotions are already accelerated as well 'cause they've gone through this process. They're almost more emotionally connected to that property after an auction than they were prior. So yeah, the risk of overpaying and in a rising market, it is kind of difficult to overpay because you will make that up in equity in a reasonable amount of time, but the risk of overpaying does increase, making an offer private treaty immediately after auction. So if you can do it, get the price out of them. Work on how you negotiate, go back and listen to that episode to try and get their price down on the day, agree it, put your paddle up at whatever price you guys have agreed on in that side bar, knock it down under auction conditions because then it's fully transparent. You know that you've bought it for, hopefully recently, fat money. - So the long and short of it is, don't be scared of auctions, embrace it, be prepared, have brave conversations ahead of time and go there and be confident, or at least pretend to be confident. - Yeah, exactly right. - Thank you for sticking with us. That was a long episode, auctions are big. Guys, I'm Chase, he's Sam, cue the song. (upbeat music)