The actual strategies you will use while bidding will change based on what type of auction you’re attending. You won’t bid the same way during an online auction that you would in person at an auction.
However, there are a lot of similarities that hold true in either case and that is what I’m going to explain here. Using these methods and learning to spot them will help you win more bids and avoid the bad ones.
Here’s a few of my favorites:
1) Playing Opossum
This is what you should be doing most of the time. You want to sit back and literally wait until the last second to bid. When everyone thinks you’re dead and it’s game over, you leap in with a solid bid and catch everyone off guard. It lets you evaluate the bidding direction and decide whether or not you should even bid without ever giving away any of your tactics. It makes you a formidable opponent that is hard to read.
2) El Cheapo
This is a tactic you will see very often but should never use yourself. The goal of the El Cheapo method is to win the bid for as little money as possible. What actually happens in most cases is that it costs you a LOT of money needlessly. You can spot this very easily. Find the person who +1’s whatever the highest bid is consistently. (For example: If the
minimum raise is $100, they will use just that. A bid of $10,000 would get raised $10,100 and +$100 more every time they lose.)
This can cause low digit bidding wars that get out of hand quickly. The mentality becomes: “Oh well, what’s another $100?” You will regularly see these wars take a property to fair market value or higher. They are super easy to beat if you engage them 2-3 times and then spike the bid, they will often freeze and miss out while they’re thinking and checking their numbers after the pattern break.
3) Nuclear Fallout
This is a personal favorite. This works great when you have lots of competition. Instead of starting off the bid at the minimum bid like everyone is used to, you come in right from the start with a near max bid offer. This will immediately eliminate low end competition from bidding up the asset and will typically force the tougher competition to recheck their numbers. This can bring some surprising wins on hot assets.
4) Run & Gun
You should learn to recognize this technique and avoid it! Typically a new bidder mistake, these folks will just throw out random numbers with no rhyme or reason. The only other person likely to use this approach is a seasoned veteran mixing up the pot. Both of these personalities are something you want to avoid. You don’t want to be hustled or led to crazy town by someone who may not fully understand what they’re doing or what the asset is actually worth.
5) Bait & Switch
I saved this for last because it’s really only useful in online auctions. Most online auctions will extend the auction timer if the winner is outbid. This can keep auctions open far longer than they should be and exponentially increase the purchase price. To avoid this problem, we developed what we call the bait and switch. You will want to engage them 2-3 times at the last minute in their favorite pattern. After you have the winning bid again, raise your max bid well outside of their pattern limit. Once you see them bid again, it will typically be in their normal pattern. That’s when you strike and raise your bid even though you’re the current winner. What that will do is force them to bid again which won’t be enough.
Then one of two things happen. They will either pause to see how high they are willing to jump or they will bid again quickly but a little higher than their normal pattern. All of this wastes valuable time and you repeat it until the clock runs out. If they never pass your bid, the clock won’t reset and they are doomed. It may feel like this costs you a few thousand dollars more than it should, but remember that it will likely go MUCH further by engaging them in a constant bidding war.
Hope these tips help and thanks for being part of the TAI Community!