I need some strategy on bidding on an estate auction for property

[JD Martin]

Hey all,

I am hoping to hear from experienced auction bidders here, especially those experienced with estate auctions, but certainly anyone feel free to chime in.

There is an auction that is happening in a couple of weeks. One of my neighbors passed away (old age). I've lived in the same house for many years, and we had a gentleman's agreement that if he ever wanted to sell any land off he'd give me a shot at it. Well, he died and his kids have the property, and they are having an auction house auction everything off - the house with some land, another chunk of land separate from the house (which borders my house), personal property, etc. 

I really want this property. It borders my property on two sides, and virtually anything short of it staying the way it is (wooded) is going to severely derail my quality of life - and I'd rather not have to move. 

As best as I can tell (unless anyone has any ideas on how I might purchase something before it actually gets to auction), I will have to be the winning bidder here. I suspect there will be some interest from others, but maybe not a ton as the land is steep and rocky. There is some harvestable timber, but my neighbor had removed some of that before so I don't think it's worth a ton. Beyond that, there's no water, electricity or sewer on the property; water and electric is nearby but there's no sewer at all. 

I'm hoping to get some good strategy tips on how to play this at auction. I attended one of this company's auctions last weekend just to get a feel for how these private estate auctions go, and it kind of went like this: auctioneer asked for an opening amount, no one bid, one of the auctioneer helpers bid it lower, then some people started chiming in, and it went back and forth between a few people before finally ending about 25% higher than the number the auctioneer started at. 

So if you've ever done one of these auctions, what kind of strategy should I employ? I've heard some people say just come big at the beginning to wipe out the bottom feeders, and I've also heard some people say that doing that sets an anchor price that leads others to believe a number just a little higher than that is not a bad deal. I've heard of doing nothing until the end and then sniping the last bidder, and I've heard continually bid so everyone knows you're serious. I've never bid an estate auction before, in a situation where there's really no floor (i.e. the bank is going to bid what they're owed), so I'm not really sure what should be the way to go about this - and I personally have a lot riding on being the winning bidder.

I'm open to hear anything and everything. Thanks.

[Joe Splitrock]

@JD Martin based on what you described, you are probably the one who wants it most. You just want to avoid unnecessarily bidding it higher. The auctioneer is going to work hard to get two or more bidders to play off each other. If they can get you and someone else in a competition with each other, it can drive the price higher than either of you may normally pay. If I was you, I would want to win the bid at almost any cost. I used to live in the country and 6 acres went for sale on my property line. Although I consider myself a good negotiator, in that case I dropped the full asking price two days after it was listed. You don't want someone to setup a dirt bike track next door (I had that happen to a friend) or worse. Although we talk about not getting emotional when investing, it is hard when it is next door to your little slice of heaven.

Lower starting price can actually drive it higher in the end. It can attract more bidders who get emotionally involved. If people sense from the beginning that this isn't going to be a "steal", they will just stay out of the bidding.

The auctioneer wants you and everyone to continually bid. Their goal is to create a frenzy that drives prices up. I would avoid the tiny back and fourth bids. When you put a bid in, raise the level a larger amount. In other words if two people are going back and fourth at $500 increments, drop a $5000 increase on it. You want other people to feel like bidding against you isn't worth it. Get people to drop out, because the more they bid, the more they get invested in winning the bid. It can become more about beating other bidders than getting the property. 

Don't feel bad if you pay a bit of a premium. A crappy neighbor can make your life horrible. The reason we all own rental properties is to have the money to NOT have to deal with crappy neighbors. 

Good luck, keep us updated.