Small Fish in Pond Filled with Sharks

As for investment purposes, I tend to stick to my guns and work what I know. What I know is Tax Auctions. Which is great as long as I do not get ahead of myself. It is very easy to become that small fish in a pond full of sharks; even at the auctions that I attend regularly. 

I say this as a precaution to those who plan on investing through tax auctions or even bank foreclosure (trustee sale) auctions. These two types of auctions are very similar, yet are completely different. For example, the sheriff will not proxy bid on the taxing authorities behalf to increase the price. Where as, a rep for the trustee can place bids on a property to run up the price. There are some people with deep pockets at a tax auction that will buy several properties. At a trustee sale, there could be one person who has uber deep pockets for that property that you want to bid on. 

At tax auctions, the regular attendees know each other, and are quick to learn who they will be bidding against. I watched a guy bid on a property without street access, just to prove that the other party bidding wasn't going to walk away with the property. And after he won, he signed the property over to the guy just to say F-you!  This same guy also ran a property up $50,000 because a mortgage company was trying to save (bid on the bank's asset) their property at a lower price than the taxes. 

The regulars like to play mind games with other bidders. Like bidding in $1 increments. So if the last bid was $1200, they would bid $1201, and so on. The funny thing is, this "Jedi Mind Trick" really plays games in the heads of inexperienced bidders at the auction. They get frustrated with the lower increments, which slows the whole auction process to a grinding halt. They will also try and overbid a property, by changing their increments from say $100 to $500 or even $1000. This just causes them to spend more money. The regulars will quit bidding, and leave the frustrated party holding the proverbial bag (overpriced property). I have even seen a bidder come to the tax sale with the quit claim deed in hand, to quiet the title after they purchased the tax deed at the auction.

So how does the small fish beat these mean nasty sharks? 

The first answer is simple really; do your homework. I cannot stress this enough. 

Even these sharks will miss great deals, just because their egos got in the way. I watched a guy buy a million dollar property for $1250. The sharks just watched and laughed about how much grass he had to mow. 

2nd, don't let the sharks think your intimidated. Once you let them in your head, they will get you to spend more money than you want. Be prepared to walk away from a property that you spent $1000 on for investigation purposes.

3rd. Establishing a pattern of dominance is key. Only bid on the properties you truly want to own, and win them with authority. If the shark does dollar increments, you do dollar increments. It will drive everyone else nuts while you get the property at a lower price. It will also drive away impatient people who may be considering bidding on the property.

4th. Watch the regulars, and ask them questions when you are not participating in the sale. They will tell you who buys what types of properties frequently; example, vacant lots, SFR, or Commercial properties. This does mean you need to do your homework on your opponents. As a proponent of small bids, and big returns; it is best to know when they (regulars/sharks) aren't paying attention. I guess you can say it's a lot like poker, everyone has tells. You just need to know what they are.

5th.Don't bid just to bid. I bought a property for $489.00 because I waited to see if anyone else would bid. The auctioneer was on "going twice" before I placed my bid, to prevent the strike off. I sold the $489 propert for ten fold profit. I bet had I placed my bid sooner, someone would have jumped in and increased the bidding to try and empty my pockets.

Just because you may have shallow pockets, doesn't mean you need to be shark food. "To know your opponent, is to gain victory in battle"- Tzu