I still remember my first foreclosure auction. My partner and I arrived at our total savings with a series of cashier checks neatly packed in one envelope. There were dozens of people around us from different walks of life. But like us, they all had the same goal: buying real estate at a discount.
There was literally in those combined pockets Millions of dollars.. When bidding for the property to be purchased began, a wave of tension struck.To my surprise, that feeling very Similar to what you get when you make a high stakes bet at a poker table.
Looking back, it’s easy to see why. As with any substantive bet, bidding for foreclosure is dangerous. You are in a position to win (or lose) a significant amount of money.
And not only that, buy foreclosures at auction teeth Competitiveness. If you do due diligence and select a property that has good potential for profit, other participants are more likely to bid on you. This is a tricky combination that often causes people to behave in unexpected ways.
Stress and competition have a way to take over your rational brain and allow you to control your emotions. In poker, this is called tilt.
Don’t lean at auction
When you’re sitting at home analyzing a property and planning a purchase, it’s easy to think that you’ll be cool and collected when it’s time to bid. However, the atmosphere of the auction is not as calm and comfortable as the environment of your home. Competition, stakes, excitement-they are combined in ways that can make you do things that you can never do otherwise.
When a poker player leans, emotions dominate and play is adversely affected. This is exactly what can happen to you at an auction. For example, you may start bidding more than you need, even though the numbers no longer make sense.I’ve seen people who get caught up in the emotions of the auction and bid More than double The amount they felt was safe.
That’s why auctions aim to avoid tilting at any cost. In my opinion, there are actually only two ways to do this.
The first is to participate in many auctions and buy a fair share of the foreclosure. After all, experience helps you keep your head in the heat of the moment.
However, if you’re just getting started, this won’t help. Therefore, we recommend that you apply the second approach to new bidders. Adopt a set of simple rules and strategies to help you stay calm and manage once your bid is open.
Here are nine that helped me avoid the tilt of my time as a professional foreclosure flipper.
1. Have the right goal
It’s refreshing to bid on someone else in real time, but it’s not your goal to beat other bidders. Your goal is to buy a house, not to beat people. There is no problem with a little friendly competition. It can even be a fun part of friendship.
But when it changes your goals, it doesn’t help.
Remember: Your goal is not to win at any cost, but to buy real estate at a good price.
2. Know the foreclosure bid in advance
Before the auction, you need to prepare a bid sheet with notes and information about the property that fits your plan and budget. A maximum bid is required for each property.
I never have If you are particularly unfamiliar with the auction, please exceed the bid amount.
I know what you do absolutely I’m tempted. It’s almost impossible not to get excited about some properties, and that’s perfectly fine. But that excitement can’t lure you into overbidding. It’s a surefire way to lose money.
Remember: Please prepare the highest bid in advance and do not exceed it.
3. Arrive early and prepare
Through a painful experience, I learned that participating in an unprepared auction can lead to bad decisions.
Therefore, it is advisable to complete the final work on the bid sheet the day before the auction. At the latest.. You will also receive a check the day before so that you can arrive at the auction early. These early preparatory efforts will help you stay calm when it’s time to bid.
By controlling as much as you can, you are more likely to string what you can’t do.
Remember: Being prepared and arriving early will increase your chances of calming down.
4. Listen carefully
Auctions can be chaotic, noisy, and full of distractions. When attending an auction, it is essential to focus on the trustee and listen carefully so that you can clearly hear the loan and property description.
Otherwise, you can make costly mistakes.
For example, there are many Smiths in the world, and two may be facing foreclosure at the same time. If you are not paying attention, you may bid on the wrong property. I’ve seen it happen.
Remember: Focus and listen carefully. Simple mistakes can be costly!
5. Do not bid on unknown or abandoned foreclosures
I’m always amazed at how properties I haven’t analyzed or have already discarded appear to have been suddenly purchased. Still, no matter how much I want to bid, I won’t bid.
Unless the properties announced at the auction are listed at a preset bid price, they are not for you.
Remember: Stick to the properties listed on the bid sheet.
6. Bring a voice of reason
Many bidders invite others to participate in the auction. This is usually due to the fact that it is easy to miss a bid in a busy auction where multiple trustees call the property.
However, if this is your first time, there is a better reason to bring someone. It is to make them function as a second brain. Give them your property and your bid. Arrange in advance for them to let you know if you are starting to tilt.
Remember: Engage your friends and partners in the auction. It’s more fun and helps prevent tilting.
7. Accept to go home empty-handed
Recently, we bought a home at an auction that exceeded the maximum bid we set the day before by thousands of dollars. reason? Our bidders didn’t want to go home empty-handed.
It’s a simple mistake. It takes a lot of preparation on the day of the auction and it’s hard to think that you might go home without doing anything.
But believe me. It’s better to go home empty-handed than to go home with an expensive property. You cannot make money by losing money. Even if you don’t buy anything, you will come home with valuable experience that will help you in your next auction.
Remember: Going home empty-handed is better than doing bad shopping.
8. Trust yourself and the process
I’ve been involved in bidding just because I thought other bidders knew better than I did. When you’re learning rope, it’s a trap that’s easy to fall into.
please do not.
Trust your work in the midst of that moment.If you follow the process outlined in Bid to buy, Then you did the job. If in doubt, look at the bid sheet and follow your own instructions. Think of the bid sheet as being sent over time as a useful message when you are anxiously standing on the stairs of the courthouse.
It is irrelevant what other bidders do. Trust yourself and the process.
Remember: Ignore your feelings towards other bidders. Trust yourself and the process.
9. Don’t worry about bidding style
Auctions have something in common with poker, not just tilting.
Buyers are often strategic in their bidding style. Some people go all-in to scare the competition and bid big. Others bid small amounts to make them look indifferent.
In reality, I don’t really know the bidding style. They are tactics designed to play with your emotions. I don’t know if all-in bidders are desperate, bluffed, or just attending the auction for the first time. Similarly, it is not possible to determine if a person with a low bid is reluctant, has broken, or is implementing a particular strategy.
The best approach as a new bidder is to focus on the numbers and rely on the bid sheet. What matters is whether your current bid is above or below your maximum bid.
As you gain experience, you will become accustomed to some of the other players and their bidding style. You can later try your bidding style or follow someone else’s style. But for now, it just plays the numbers. Keep an eye on your wallet without worrying about someone else’s wallet.
Remember: Ignore the attitudes of other bidders and focus on the numbers.
The final idea for the first person to buy at auction
Believe me, I know how strange it feels to stand in a crowd that knows that millions of dollars are about to change hands. Most people don’t see such things, and it can be overwhelming for first-timers.
But that’s part of the excitement of the auction. It’s a truly unique experience.
Accepting the excitement and really enjoying the experience will help you keep your head cool. The alternative — crazy — won’t do you any good.
As a new bidder, stay calm and enjoy yourself. Be careful if you feel you are in danger of tilting. There are always other auctions and other opportunities to buy foreclosures.
Be sure to check out the new foreclosure book I co-authored with David Osborn. Bid to buy..Now available in Bigger Pockets Bookstore..
Do you have questions about buying foreclosures at auction?
Please post in the comments section below.