“this property is perfect for my portfolio, why shouldn’t i keep bidding at auction?”

The Challenge

Attending the auction, bidding commenced and we were up against one other party. Bidding from the other party was fast and aggressive and it was clear as the price increased, that the other party had more to spend and would not drop out of the competition for some time yet.

What We Did

By having done prior market research and assessing recent comparable sales, the state of the market, scarcity of the property and the financial metrics we were needing to hit for our client we were able to determine the true value of the property and limit how high we would bid, ensuring that we did not overpay for the property.

Upon establishing that the other bidder was not slowing down, we pulled the pin on our bidding and advised the client over the phone of our reasoning.

The selling agent approached us to encourage further bidding, also knowing that the other bidder had more money to pay and attempting to drive the bidding price higher in order to achieve a better result for their vendor. We declined to do so.

potential Outcomes

The risk of continuing to bid under these circumstances is huge, had we been accidentally reading the play incorrectly, we could have wound up purchasing the property at a price that was far too high, resulting in a purchase that was counter-productive to our clients needs.

This can result in the following:-

• A shortfall between the price of the property and the bank valuation
• A purchase price that exceeds the client’s borrowing capacity
• Setting a new record for the area would drive prices of upcoming sales higher, costing our client when they eventually do successfully purchase and potentially driving us out of the area