How Do Auctions Actually Work?

So you’ve decided to list your property for sale and the move has sparked immense interest from several investors. One way to get the best sale price possible is to pit the suitors against each other in the shape of an auction.

Investopedia.com describes an auction as: “A system where potential buyers place competitive bids on assets and services. The asset or service in question will sell to the party that places the highest bid.”

But how do auctions work in practicality?

Firstly, the auctioneer sets the amount for bids to increase in a process called rises or bidding advances. One is not obliged to bid at the amount the auctioneer has stated and can bid less but the auctioneer will decide whether they’ll accept or reject the offer.

During the event the auctioneer keeps seeking bids until, at a minimum, they achieve the reserve. If it’s not reached the auction will be passed in. This means the highest bidder gets first rights to negotiate with the vendor to see if a deal can be made.

For those attending an auction as a buyer, it will serve you well to remember the aim an auction is to coerce people into a situation where they get caught up in the moment, become competitive or otherwise lose control of their bidding.