Transcript:
Hey there, it’s Casey Denman here at TaxSaleAcademy.com. Thanks so much for joining me today. I’ve got a great little training lesson for you today and I think it’s such a valuable lesson that it will be going on both my YouTube channel as well as on my Podcast as a Friday episode.
I’m talking about auction fever. In short auction fever is caused by the excitement of the action and causes a bidder to deviate from their originally intended approach.
I want to start off with a little story and then I’ll get into how you can avoid auction fever. A number of years ago, probably 13 or 14 years at this point I was out of state attending a tax lien auction. I was preparing the day before at my hotel when a friend calls me. He asked what I was doing, I explained it briefly and that was about it. The next thing I know he calls me a few hours later to tell me that he’s on his way. Now, mind you, this was about a 15 hour drive for him. And he had zero experience in the tax sale business. But he was all about taking the fire, aim, ready approach where everything is done out of order. Anyhow, he shows up asks me to teach him at like ten in the evening before an early morning auction. Long story short, I was annoyed, gave him a very quick lesson showed him how to research and went to bed.
He shows up the next morning at the auction. I could only hope it wasn’t going to be as bad as I though tit would be for him. I told him to approach it as a practice auction where he was there just to learn, but he immediately started bidding. On one specific property, I had determined by max bid would be somewhere around $1,200. When I stopped bidding, he started bidding. And he was bidding against another person. They went back and forth many times until my friend ended up paying $4,500 for the lien. There was zero chance that he would make a single penny on the lien if they redeemed. Like, none. He stood to lose $2500 or more depending on when the lien would redeem. He might’ve made money if the property went to foreclosure, but I knew the stats and I knew this property would go to foreclosure. He grossly overpaid.
So, after the auction in the courthouse foyer I asked him why he paid so much. I was trying to learn, maybe I had missed something. His answer shocked me. He looked at me, nodded towards the guy that had bid against him and he said, I didn’t want him to get it. He had such auction fever, that he was willing to just waste money as far as I was concerned.
The problem is that this happens A LOT. Especially amongst new bidders who get overly excited. I also see it happen for bidders who are not seeing the success they desire as far as actually winning properties. Everything they’ve done up to the point when they start bidding goes out the window. They bid off of emotions. And emotional bidding is a recipe for disaster. When you start bidding off of emotions you will overpay.
So, how do you avoid auction fever?
It is VERY simply. Discipline. I discussed this in last week’s podcast episode when we talked about bid sheets. Prior to the auction is when you’ll put all of your knowledge and effort into research the property in a way that you’re completely confident in the value that you obtained. Based off of that value you will establish a bid amount. That bid amount is recorded into your bid sheet and is something that you MUST stick with. Regardless of who bids against you, of how many people are in the room, or how successful or unsuccessful that auction is for you . . . none of that stuff changes the value of that property and subsequently your max bid amount. THAT DOES NOT CHANGE.
It’s up to you to have the discipline to research properties properly. To establish that max bid amount. And most importantly, to stick to it. YOU MUST STICK TO YOUR BID AMOUNT! Do not deviate from them.
Now, if you’re continually unsuccessful you can go back and analyze them after the auction concludes to see if you need to make adjustments. But, they should NEVER be changed mid auction.
I hope this episode has helped. PLEASE do not let yourself get auction fever. It’s easier to get than you think and when you do . . . it’ll cost you lots and lots of money.
Thanks so much for joining me and I’ll see you next time. Take care, bye bye.