Off-the-Wall Bidding In Property Auctions Explained
Property auctions can be exciting and fast-paced events. If you're new to the world of auctions, you might hear a few terms that sound a bit odd. One of these is "off-the-wall bidding." It's a practice that's common in UK property auctions, but not everyone knows what it means or how it works.
In this article, we cover the what, why and how of off-the-wall bidding to help you buy or sell a house at auction with confidence.
What Is Off-The-Wall Bidding?
Off-the-wall bidding, also known as "bidding off the wall" or simply "wall bidding," is a technique used by auctioneers.
It's when the auctioneer invents a bid that doesn't come from any real bidder in the room. This might sound a bit dodgy at first, but it's actually a normal and accepted part of many in-room property auctions to help the bidding along and encourage activity from buyers waiting to bid.
It's one of the reasons why due diligence on investment property is so important and goes deeper than simply checking out how much the house is worth or reviewing the auction title pack, but knowing the whole property buying process.
How Off-The-Wall Bidding Works
Let's say a house is up for auction with a reserve price of £100,000. This means the seller won't accept any bids below this amount. Now, imagine someone in the room bids £90,000, but no one else is bidding. The auctioneer might then "bid off the wall" at £95,000.
If the original bidder then raises their bid to £100,000, the house can now be sold because it's reached the reserve price. The key thing to remember is that off-the-wall bids only happen below the reserve price. The auctioneer can't use this technique to push the price above what the seller has agreed to accept.
The Purpose of Off-The-Wall Bidding
You might wonder why auctioneers do this. The main reason is to keep the bidding moving and to try to reach the reserve price. Auctions work best when there's competition between bidders. If bidding stalls below the reserve price, off-the-wall bidding can help nudge it along.
It's also a way to protect the seller's interests. Remember, if the bidding doesn't reach the reserve price, the property won't be sold. Off-the-wall bidding gives the auctioneer a tool to try and bridge the gap between the highest real bid and the reserve price.
Auction Bidding Pros and Cons
For sellers and auctioneers, off-the-wall bidding can be helpful. It can create a sense of competition and potentially lead to higher bids. It also increases the chances of reaching the reserve price and making a sale.
However, for buyers, it can be confusing if you're not aware it's happening. You might think you're bidding against other real buyers when you're actually competing with the auctioneer's invented bids. This is why it's important to understand how auctions work before you participate.
How To Recognise When It Is Happening
When you are preparing to become a landlord, buying your first property in an auction room can feel like jumping straight in with the experts. As a new property investor, learning the basics of real estate, spotting off-the-wall bidding can be tricky, especially in a busy auction room.
Here are a few things to watch out for:
- Pay attention to where the auctioneer is looking when they announce bids. If they seem to be acknowledging bids from empty spaces or from people who don't seem to be bidding, it might be off-the-wall bidding.
- Listen carefully to the auctioneer's language. They might use vague terms like "the bid is with me" instead of pointing to a specific bidder.
- Keep track of the bidding increments. If they suddenly become smaller as the price approaches what might be the reserve price, this could be a sign of off-the-wall bidding.
Remember, though, that experienced auctioneers are skilled at making off-the-wall bids seem real. The best defence is to set your own maximum price and stick to it, regardless of other bids.
FAQs About This Auction Bidding Strategy
Q: Is off-the-wall bidding legal?
A: Yes, it's a standard practice in many in-room property auctions, as long as it's only used below the reserve price. However, when considering how does an online property auction work, you won't see this practice online, as the sale process for online-only auctions happens over a 28-day timeline with plenty of time for buyers to increase their bids.
Q: Can I lose money because of off-the-wall bidding?
A: No, because you are always in control of your own bids. Never bid more than you're willing to pay. The auctioneer cannot sell a property if nobody is bidding, and it cannot sell the property in the auction room if there is only one bidder who is below the reserve. This technique enables a buyer and seller to get to the point of an acceptable offer to enable a property sale and exchange.
It is not like gazumping in a private treaty sale where late bids from new buyers are real and push prices up.
Q: What happens if no one bids at a house auction?
A: If bidding doesn't reach the reserve price, the property usually won't be sold at the auction. It might be offered for sale afterwards through private treaty.