Bridging lenders, however, frequently use auction and yet sometimes without a detailed understanding of how it works.  The rationale seems to be “it does work, so don’t get involved”.

Answer

Only if you want to!

Real estate auctioneers tend to sell “high ticket” lots so in everything we do, we try to make sure that everything runs smoothly, that there are no errors and no unforeseen happenings.

Having said that, we often find that people want to be discreet in their bidding. This can be for a variety of reasons; they may just be private people, they may not want a competitor (or even a partner) to know that they are bidding for something. This can arise in many ways.

In very buoyant markets (remember them?) when there was more of a tendency for people to buy “blind” without having seen the lot, some very well known investors had the view that if one of their competitors saw them bidding for something, they would assume that it was worthwhile, and bid against them. We have had adjoining owners, or tenants bidding, we have even had people buying a “love nest” for a girlfriend (funnily enough, they also ask us to sell them again); for all these reasons people may want to conceal their actions from the market.

So it is not unusual for people to try to bid very discreetly and it can be quite a job to notice them in the first place, and then to be sure that they are continuing.  For this reason you will often hear the auctioneer say “the bid is at the front on the right”, or “the lady with the red scarf”. Of course we try to respect bidders’ privacy and it would be very unusual for us to name a bidder, even when we know them well; at most we might say that the bid is from Mr P, but the last thing we want is to knock the lot down and then have people arguing with us over who actually has the contract (and the contract is formed by the fall of the gavel, not by the signature on the memorandum).  For this reason, most auctioneers will provide that their word is final in the event of a dispute.

Sometimes a buyer will come to us beforehand and say that they want to bid discreetly, they will sit in an agreed place and that we should look out for them. This is sensible but I always make the proviso that the risk is on them and I can’t guarantee to remember every bidder when we are selling maybe 150 lots and have a room with hundreds of potential buyers. Because of this, I warn them that it is up to them to make sure that I have seen them.

Equally some bidders want to wait until the last possible second either because they can’t make their mind up, or because they perceive this as not driving the bidding up. Personally, my view is that if you bid in a confident and positive way you are more likely to deter the competition. Certainly I have had disappointed bidders who leave it too late – again, in a room of several hundred people, it is impossible to see every corner.

The real answer to your question is that you are unlikely to buy by mistake; although I once had a man sitting in the front row with a nervous twitch and every time he gave a sharp nod of the head, I took a bid from him.  This went on for a while and it was only when I noticed that he nodded when I wasn’t looking for a bid that I realised – fortunately before I sold him anything.  I must admit that he helped drive the price up though!