oc | Wednesday 26th February

Backward Bidding

Backward bidding is about “throwing stones back”, it’s about fighting back, it’s about saying enough is enough.

We have the greatest respect for the professional abilities of agents at , , and many other agents. But we have to be upfront; as much as we support them and the roles they play – we do not support their quoting regimes especially if attached to a Clayton’s Reserve strategy.

So enter our Backward bidding strategy – our partial solution until the industry acts.backward

Backward bidding takes place on auction day, and it goes something like this.

  • Prior to the auction we ask if there is a reserve – if there is no reserve why bid? First right of refusal – refusal of what – there is no reserve.
  • If we know we have a potential Clayton’s Reserve and we know the agent’s plan is to pass the in, we bid a sensible opening bid – we do this for a reason.
  • Next we ask if it is on the market
  • We expect a ‘No’ – because we know the agent has been giving a bulls..t quote
  • If we get a  ‘No’ then
  • We put in a lower bid. This creates angst amongst some auctioneers as they stand there reciting the auction rules, the ones by the way they are trying to abuse. They tell you that you can’t withdraw a bid. But we are not, we are placing a new one, it’s just that it’s lower. They then tell you they don’t have to accept a bid, which is true.

We don’t fight back verbally – we remain silent

This usually leads to some public uncomfortableness (please we are against any form of threatening or inappropriate behaviour and do not support it under any circumstances), and when things settle one of the following usually happens

  • Acceptance of our lower bid by the auctioneer
  • The auctioneer refusing to take the new bid and passing the property in – to nobody
  • A vendor bid
  • Somebody else bidding

Our next response if the auction continues and we are above the quote is to bid like this:

  • “If I bid another $20,000 will it be on the market?”
  • The usual response is either rude or friendly such as: I’ll ask if you bid that.
  • After a brief visit inside the auctioneer comes back and tells us yes or “we are so close”.

Right or wrong is not our issue – a vendor can ask whatever they want – what we try and do is best manage situations where the vendor won’t tell you what they really want as they hide behind a “bulls..t auction quote and Clayton’s Reserve strategy”

There is nothing wrong with a selling agent trying to get more money. That’s their job. Why we backward bid is because some agents and vendors in trying to get more money go beyond what is acceptable – in our opinion they operate in a dubious manner.

But I digress, let’s presume it is passed–in to us. Then what?

We have different pass-in strategies depending on:

1)      The reserve the agent has told us during the campaign

2)      What the agent tells us it is now

3)      How many other bidders there are

All these are of course under the overriding umbrella of clients’ risk v reward instructions.

We will forward bid and then backward bid, or just forward bid or just backward bid, or in fact do nothing depending on our clients’ instructions and vendor responses. A number of times at pass-ins we have bid below the pass-in figure. Yes we have bought homes below higher offers and pass-in figures and yes we have bought them above pass-in figures.

As buyers you need to be prepared to fight, when circumstances force this. If your only negotiation technique is the kangaroo frozen in the headlights technique, or the Manuel from Fawlty Towers technique where you just keep going up and up in order to please then you will have issues. If you are up against the best exponents of Clayton’s Reserves, you will end up paying an incredibly high price – when it was not fair to do so – it is not fair if you had bid, won first right of refusal and then had not been told the real reserve or that reserve did not reasonably coincide with the quote.

Please if you don’t bid sensibly at auction, this is an EOI negotiation or private/off market sale without a price or bulls..t quote then we totally support vendor open slather – it’s caveat emptor all the way. The “floor, stairs, then new level again, floors, stairs, then new level again” price ramping technique is not only brilliant when done well, it’s fair and would be what I would want my agent to do if I was selling in these circumstances.

After the initially chest pumping on backward bidding you should expect a certain level of discomfort.

The fact is that some agents will want to break you, sell it to another buyer given half the chance just so as you learn a lesson. After all you have attacked not only the bulls..t quoting and Clayton’s reserve but you have also attacked their ego. Please backward bidding is heavy stuff, just as a seller may lose your best offer, you may very well lose what you wanted to buy – you are playing for keeps, so use it in the right circumstances.

Backward bidding, like some quoting regimes and Clayton’s reserves is heavy, heavy stuff.

This is our last article in the current series on Negotiation – we plan to do another series early in 2011. For more in this Negotiation series refer to the Articles section on the homepage of website. From the week after Grand Final and will be starting a series on Values and Prices.

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