“Going once… going twice… are we all done? … SOLD”
Wait, what? You started the day enthusiastically optimistic about bidding on your dream home at auction. Now, you’re the sad underbidder. You missed out and someone else is the happy buyer.
Undoubtedly, commiserations are in order. But more importantly, a warning is more valuable.
What is an underbidder?
The underbidder is the last person to drop out of the auction. No one wants to be runner up, and it’s devastating.
Being the underbidder makes you extremely vulnerable. You’ve just missed out on the home of your dreams. The deposit cheque is in your pocket. It’s natural to feel glum.
Agents have you in their sights
They know you’re highly disappointed and emotional. Plus, you’re ready to buy. Any agent would love to get their mitts on that deposit cheque. Forewarned is forearmed, so by being prepared for becoming the underbidder, you won’t make any rash decisions you’ll regret later.
How agents deal with underbidders
They offer their commiserations, then give you the chance to view an exclusive off-market property. This property may be just passed in, have an unrealistic asking price, maybe it just can’t shift. Because you’re emotional about missing out, you’re more likely to overlook the flaws of the property. You’re not in the right headspace to cast a critical eye. Plus, many underbidders are prone to rash decisions.
You’re a hot lead for an agent
You are ready to buy a home, so agents are ready to sell you one. They don’t care if it’s the right property for you. Agents have staff ready to catch the underbidder at auctions. Plus, competing agents often attend auctions to see if they can tempt the underbidder too.
“I must buy a house, any house”
It’s a lot like a rebound romance. Your relationship ends, so you rush into a fling with someone entirely unsuitable. Well, it’s easy to break off a relationship with a dud that your dog hates and is rude to waiters. But a dud house? It’s very difficult to resell when you change your mind.
“But I told everyone I was bidding today”
Better to have the embarrassment of missing out at auction than the regret of buying a property. You’ll get over the disappointment in a few days but making the wrong home purchase could cause you distress for decades.
“I’m sick of missing out”
The more times you are an underbidder the more vulnerable you become. After a few disappointments, some buyers lose patience and buy out of frustration. They buy the next property under their nose. That is rarely a good decision.
“I’ll never find another house like it”
A scarcity mentality makes you more prone to unwise purchases. There will always be another one. If you have a realistic budget and a sensible strategy, you will find the right property. Patience is key. Many property buyers are relieved they missed out at auction because they went on to find an even better home later.
How you buy is how you sell
If there’s no one competing to buy this property you’re considering as an underbidder, then when you sell,the general rule is there won’t be much competition either.
Our underbidder story: “We think this okay”
We were working with a buyer who was the direct underbidder – twice. (We didn’t recommend they stretch their budget to beyond what we thought the property was worth.) A day after a particularly crushing disappointment, they approached us with a house they’d found on their own. They knew the property had flaws but they were willing to overlook them. In their panic, they ignore their own carefully honed wish list. The house they wanted was overpriced, structurally unsound and unsuitable for their needs. Plus, it was backing on to a railway line. Luckily we were there to prevent the client making a decision they’d regret later.
Describing your potential dream house as ‘okay’ is a red flag that it’s not the right purchase for you.
What to do if you are the underbidder
- Don’t panic!
- Avoid buying a house for at least 48-72 hours until your emotions settle without an independent party to advise.
- Even if you don’t think you are upset – wait.
- Get an advocate like us or an impartial third party to look critically at properties with you.
- Don’t listen to pressure from agents. They might tell you there’s other buyers on a similar property and encourage you to snap it up. Unlike public auction sales, private sales are behind closed doors so you don’t know the true level of demand. You’re flying blind, so be cautious.
- Remember, it’s the most important financial decision of your life and not one to be taken lightly.
Finally, we know it is disappointing to miss out at auction. With a little patience and the ability to resist tempting offers from agents, you’ll be moving into your dream house in the not too distant future.