Key takeaways
If you're looking to buy a property at auction, you need to understand the psychology at play. Knowing these tactics can help you make smarter decisions and avoid falling into the six most common auction sins.
Overbidding through emotion is the costly pitfall of passion. Agents and auctioneers count on this, so be careful not to get swept up in the moment. To avoid financial overreach, set a strict budget before the auction begins, and treat it as an unbreakable rule. Bring along a trusted advisor or friend to keep you grounded, or have an experienced buyer's agent negotiate on your behalf.
Agents are masters at creating a narrative around a property's uniqueness. Do your due diligence and research comparable properties in the area and analyse recent sales data to avoid falling for the "one-of-a-kind" hype.
Auctioneers suggest specific bid increments to maintain momentum and keep the auction lively, and this pressures bidders to raise their offers more than they might have planned. Stay in control of your bids and don't be afraid to assert your position - bid $5,000 instead of $10,000 if that's what suits you.
Are you looking to buy a property at auction any time soon?
The property auction scene in Australia can be both exhilarating and daunting.
It's a high-stakes game where understanding the psychology at play can be the difference between securing your dream property at a fair price or walking away disappointed at losing out.
As someone who's spent decades in the property investment space and bid at hundreds of auctions, I've seen how agents use psychological tactics to their advantage.
Being aware of these tactics—and knowing how to counter them—can help you make smarter decisions.
So let’s delve into the six most common auction sins I’ve seen buyers commit and how you can avoid falling into these traps.
1. Overbidding through emotion: the costly pitfall of passion
Picture this: You’re standing among a crowd of eager bidders, the auctioneer’s voice rising in intensity, and the property you’ve set your heart on is within reach.
It’s easy to get swept up in the moment, especially when you imagine yourself living there or seeing its potential as an investment.
But this is exactly what agents and auctioneers count on.
They craft a high-energy environment designed to tap into your emotions—your excitement, fear of missing out (FOMO), and desire to win.
How to Avoid This Sin: Set a strict budget before the auction begins, and treat it as an unbreakable rule.
I suggest you write down three prices:
- The price you'd love to buy the property for (I guess this is your best-case scenario.)
- The market price did you think the property is really worth, and
- Your “walk away” price - the level to which you are prepared to extend yourself and won't be unhappy on Monday morning if you miss out.
Then, on auction day, remind yourself why you’ve set your limit—whether it’s based on your financial capacity, market research, or investment strategy.
If possible, bring along a trusted advisor or friend to keep you grounded.
Better still, have an experienced buyer's agent (a professional negotiator) it on your behalf.
Remember, there’s always another property, but financial overreach can set you back years in your investment journey.
2. The illusion of scarcity: don’t fall for the “one-of-a-kind” hype
Agents are masters at creating a narrative around a property’s uniqueness.
They might emphasise that the property is a “once-in-a-lifetime opportunity” or suggest that it’s the last of its kind on the market.
This tactic plays on the scarcity principle—our natural tendency to place higher value on things that are perceived as rare.
While it’s true that some properties are genuinely unique, the reality is that there are often similar opportunities available if you’re patient.
How to Avoid This Sin: Do your due diligence.
Research comparable properties in the area and analyse recent sales data.
If a property seems overpriced based on its features, location, or market trends, it probably is.
Remember, even in a competitive market, rushing into a purchase because of perceived scarcity can lead to regret if the property doesn’t align with your long-term goals.
3. Bid increments: the subtle manipulation of the auction flow
Auctioneers often suggest specific bid increments to maintain momentum and keep the auction lively.
For instance, they might push for $10,000 increments when $5,000 might be more appropriate, especially if the bidding has slowed down.
This strategy subtly pressures bidders to raise their offers more than they might have planned, inching closer to or beyond their budget limit.
How to Avoid This Sin: Stay in control of your bids.
You’re not obligated to follow the auctioneer’s suggested increments.
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If you feel the increment is too high, simply bid at a level that You feel comfortable with.
Don’t be afraid to assert your position—bid $5,000 instead of $10,000 if that’s what suits you.
It’s your money, and you have the right to bid in a way that feels comfortable and strategic.
4. Anchoring techniques: don’t let the first bid set the stage
Anchoring is a cognitive bias where people rely too heavily on the first piece of information they receive (the “anchor”) when making decisions.
In auctions, this might be the opening bid or the price guide set by the agent.
I've seen auctioneers say things like properties like this have sold for $2,000,000 - giving an unspoken expectation of where the price for the subject property should be.
Similarly, if the initial opening bid is high, it can distort your perception of the property’s true value, making you more likely to bid higher than you originally intended.
How to Avoid This Sin: Enter the auction with a well-researched valuation of the property.
Use recent sales data from similar properties in the area to establish your own anchor.
By doing so, you can objectively assess whether the bidding is heading into overpriced territory.
Stick to your pre-determined value, and don’t let the auctioneer’s or other bidders’ actions sway you into overbidding.
5. Social proof: the herd mentality can lead you astray
Auctions are social events, and we’re naturally influenced by the behaviour of those around us.
When others start bidding enthusiastically, it’s easy to feel like you should join in.
This is known as social proof—our tendency to follow the actions of others, especially in uncertain situations.
However, just because others are bidding doesn’t mean they’ve done their homework or that the property is a good investment for you at the current price.
How to Avoid This Sin: Trust your own research and instincts.
Remind yourself that every bidder has different motivations and financial situations.
Some might be inexperienced, overconfident, or bidding emotionally.
Others may be buying it for their home rather than investment and yet others may be funded by rich parents,
Keep your focus on your own investment strategy, and don’t be swayed by the actions of others.
If the bidding goes beyond your limit, be prepared to walk away.
6. Time pressure: the auctioneer’s tool to rush decisions
Auctioneers are trained to build a sense of urgency, often using rapid-fire bidding and countdowns to pressure you into making quick decisions.
This tactic is designed to reduce the time you have to think, pushing you towards hasty, emotionally driven choices.
The faster the auction progresses, the less time you have to consider your next move or consult with advisors.
How to Avoid This Sin: Practice mindfulness techniques to maintain your composure during the auction.
Deep breathing, staying focused on your strategy, and even visualising the auction process beforehand can help you remain calm.
Don’t let the auctioneer’s pace dictate your actions—take your time to bid thoughtfully, and if necessary, signal to the auctioneer to slow down.
Conclusion: empower yourself with knowledge and strategy
Auctions can be a thrilling way to purchase property, but they’re also rife with psychological tactics designed to get you to bid higher than you might have planned.
By understanding these six common auction sins and preparing accordingly, you can outsmart the agents and auctioneers, ensuring that your next auction experience is a successful one.
