Auction survival guide: Bid on your dream home without letting emotion get the better of you

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You are standing in a room with about 100 other people, all in small groups talking in hushed tones.

Glances are exchanged between groups, attempting to discern between serious bidders or curious neighbours, competitors or spectators.

A number of real estate agents hurry around the room, checking in with prospective buyers and heightening the sense of occasion and anticipation.

auction bid guide how not to overbid

Your partner paces around the house one more time, visualising what it would be like living, entertaining and spending time in different parts of the house, secretly conceptualising the looks of respect and jealousy friends and family might have as they first enter your new home.

The lead auctioneer commands presence and the crowd hushes immediately, instantly dropping small talk in order to crouch with focus at the starter's line. Months of searching and tireless debate have led to this moment.

A few jokes and a word of welcome to lighten the mood a little from the master of ceremonies, and then we're off. The game is afoot.

The speed and intensity of the auctioneer's voice are mesmerising. Your emotional inhibition is in full swing as you try to calmly play out your strategy.

Your heart rate increases, your breathing shallows, your peripheral vision shuts down, the hair on your arms bristles. Focus.

As the price approaches your pre-agreed limit, others shake their heads and exhale their hopes in deep sighs of resignation. The price approaches your high-water mark; there are only two of you left in the bidding war. The price goes beyond your limit, but you don't mind, the look of hope in your partner's eyes willing you to win.

You try to slow the bidding, but your counterpart seems to have more money than sense.

The price gets uncomfortably high. You start to panic, unsure of the financial burden. Gasps come from the crowd as the price continues to climb, until finally you admit defeat.

As the hammer falls on the inflated price you join the applause for the winner. You leave the auction with a mix of disappointment and relief.

Sad at the loss but relieved you didn't win on a bid that was well beyond your capacity to repay easily.

In any normal scenario you wouldn't dream of spending as much as you may be willing to spend during the heat of an auction - it's clearly a format designed to favour the vendor rather than the buyer.

It intentionally heightens emotions to quell the rational voice in your head that is screaming for you to pull out.

So why do we do it?

Because it's fun, of course. The adrenalin rush is exciting, it's invigorating, we love to win and we love the drama.

At the heart of what drives an auction is high emotion that blinds us to more rational thought. This emotion is heightened by an evangelical auctioneer, inexperienced bidders and sellers, the crowd and a hammer that plays the pressure-inducing role of a countdown clock.

In the same way that a plain doughnut is the most popular because of the perfect balance between sugar and fat, the auction is the perfect mix of fear and love - two primal emotions that drive all our decision making.

Fear of missing out, fear of losing, fear of looking stupid, fear of unworthiness, fear of being judged. Love of success, love of status, love of future good experiences, love of belonging and connectedness.

The interesting thing is that none of these things have anything to do with financially sound decision making, and the auctioneers know it.

Five ways to stay in control and win

1. Breathe

Practise simple techniques like box breathing or deep abdominal breaths to slow your breathing and your heart rate.

2. Create distance

Ideally don't even be in the room. Distancing yourself from the crowd mitigates the herd instinct. Consider arranging for a friend to relay your bids over the phone (even if you're in the next room).

3. Rely on experience

Find someone who has been to many auctions and draw on their knowledge.

4. Avoid feeling rushed

Actively look to slow things down to give your brain a chance to think more logically and less reactively.

5. Practise

Be the spectator at as many auctions as you can. Possibly even make some low bids just to get a sense of what it feels like to bid. The goal is to make the setting as familiar as possible. The more familiar something is, the less fearful we are.

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Phil Slade is a behavioural economist and psychologist and the author of Going Ape S#!t! and founder of Decida. He works across digital innovation, strategy and cognitive bias.
Comments
Lana Johnston
September 23, 2021 6.53pm

Some great tips here Phil - not easy to stay in control.