How Poker Prepared Me for Buying Foreclosures at Auction

I can still remember my first foreclosure auction. My partner and I arrived with our combined savings in a series of cashier’s checks neatly packed into a single envelope. Around us were dozens of other people, all from different walks of life. But like us, they all had the same goal: to buy property at a discount.

In their combined pockets were literally millions of dollars. As bidding started on the property we planned to buy, I was hit with a wave of nervous energy. To my surprise, the feeling was very similar to the one I’d get when placing high-stakes bets at the poker table.

Looking back, it’s easy to understand why. As with any substantial bet, bidding on a foreclosure is risky. You stand to win (or lose) a significant sum of money.

And it’s not just that, buying foreclosures at auction is competitive. If you’ve done your due diligence and chosen a property with plenty of profit potential, there’s a good chance that other attendees will be bidding against you. This is a tricky combination, one that often causes people to behave in ways they wouldn’t expect.

Stress and competition have a way of hijacking your rational brain and allowing emotions to take control. In poker, this is referred to as tilt.

Don’t Get Tilted at Auction

When you’re sitting at home analyzing properties and planning your buys, it’s easy to think you’ll be cool and collected when the time comes to bid. But the auction atmosphere is not calm and comfortable like your home environment. The competition, the stakes, the excitement—they combine in ways that can make you do things you’d never do otherwise.

When poker players get tilted, emotions take control and negatively affect their play. This is exactly what can happen to you at auction. You might, for instance, start bidding more than you should despite the fact that the numbers no longer make sense. I’ve seen people get so caught up in the emotion of auction that they end up bidding more than double the amount they felt was safe.

That’s why, at auction, the aim is to avoid tilt at all costs. In my opinion, there are really only two ways to do this.

The first is to attend plenty of auctions and to buy your fair share of foreclosures. After all, experience will help you keep your head in the heat of the moment.

If you’re just starting out, however, this isn’t helpful. That’s why I advise new bidders to apply the second approach: employ a series of simple rules and strategies to stay calm and in control once bidding starts.

Here are nine that have helped me avoid tilt in my time as a professional foreclosure flipper.

1. Have the Right Goal

It’s exhilarating to bid in real time against someone else, but beating other bidders should not be your objective. Your goal is to buy a house, not beat a person. There’s nothing wrong with a little friendly competition; it can even be a fun part of the camaraderie.

It’s not helpful, however, when it changes your goal.

Remember: Your goal is to buy property at a good price, not to win at all costs.

2. Know Your Foreclosure Bids in Advance

Prior to auction, you should prepare a bid sheet with notes and information on the properties that fit your plans and budget. For each property, you should have a maximum bid.

Never exceed that bid, especially if you’re new to auctions.

Know that you will absolutely be tempted to. It’s almost impossible not to get excited about some properties, and that’s totally fine. But you can’t let that excitement lure you into overbidding; it’s a surefire way to lose money.

Remember: Prepare your max bids in advance, and don’t exceed them.

3. Arrive Early and Prepared

I’ve learned through painful experience that showing up to auction unprepared leads to bad decisions.

That’s why I recommend completing the last of your bid sheet work the day prior to auction at the latest. Also, pick up your checks the day before so that you’re able to arrive at auction early. These early prep efforts will help you keep your cool when the time comes to bid.

By controlling as many things as you can, you’ll stand a better chance of keeping a leash on the things you can’t.

Remember: By preparing and arriving early, you’ll have much better chances of staying calm.

4. Listen Carefully

Auctions can be chaotic, noisy, and full of distractions. When you’re at auction, it’s imperative that you focus on the trustee and listen carefully so that you’re able to hear the loan and property description clearly.

If not, you might make a costly mistake.

For example, there are a lot of Smiths in the world, and there can easily be two of them facing foreclosure at the same time. If you’re not paying attention, you could bid on the wrong property. I’ve seen it happen.

Remember: Focus and listen carefully. Simple mistakes can be costly!

5. Don’t Bid on Unknown or Discarded Foreclosures

I’m always surprised by the ways in which a property I haven’t analyzed or have already discarded suddenly seems like a great buy in the heat of the moment. Still, regardless of how tempted I may be to bid, I don’t.

Unless the properties announced at auction are on your list with a bid price that you’ve established in advance, they’re not for you.

Remember: Stick to the properties listed on your bid sheet.

6. Bring a Voice of Reason

Many bidders bring other people with them to auction. This is usually due to the fact that it’s easy to miss a bid at a busy auction with multiple trustees calling out properties.

When you’re new, however, there’s an even better reason to bring someone along: to have them act as your second brain. Give them your properties and your bids. Arrange in advance for them to let you know if you’re starting to tilt.

Remember: Bring a friend or partner to auction. It’s more fun and can help prevent tilt.

7. Accept Going Home Empty-Handed

Recently, we bought a home at auction for thousands of dollars over the maximum bid we’d established the day before. The reason? Our bidders didn’t want to go home empty-handed.

It’s an easy mistake to make. Auction day requires a lot of preparation, and it’s painful to think you might go home with nothing.

But trust me, it’s better to go home empty-handed than to go home with an overpriced property. You can’t make money by losing money. Even if you don’t buy anything, you’ll be going home with valuable experience that will help you at the next auction.

Remember: Going home empty-handed is better than making a bad buy.

8. Trust Yourself and the Process

There have been times when I’ve been swept up in bidding just because I assumed other bidders knew more than me. When you’re learning the ropes, it’s an easy trap to fall into.

Don’t.

In the heat of the moment, trust the work. If you’ve followed the process outlined in Bidding to Buy, then you’ve done the work. When doubt surfaces, look at your bid sheet and follow your own instructions. Think of the bid sheet as a message sent through time to help you now as you stand anxiously on the courthouse steps.

What other bidders do is irrelevant. Trust in yourself and the process.

Remember: Ignore your feelings about other bidders. Trust yourself and the process.

9. Don’t Worry About Bidding Style

Auctions have more in common with poker than just tilt.

Buyers are often strategic with their style of bidding. Some will bid a big amount, going all in to scare off competition. Others bid small amounts to appear uninterested.

In reality, bidding styles don’t tell you much. They’re tactics designed to play on your emotions. You can’t tell if the all-in bidder is desperate, bluffing, or just new to auctions. Likewise, you can’t tell if the person placing low bids is reluctant, broke, or playing a specific strategy.

Your best approach as a new bidder is to focus on the numbers and to rely on your bid sheet. All that matters is whether the current bidding is above or below your max bid.

As you gain experience, you’ll become familiar with some of the other players and their bidding styles. You can later experiment with your own bidding style or follow the style of others. For now, though, just play the numbers. Keep an eye on your own wallet without worrying about anyone else’s.

Remember: Ignore the posturing of other bidders and focus on the numbers.

Final Thoughts for First-Timers Buying at Auction

Believe me, I know how strange it feels to stand in a crowd knowing that millions of dollars are about to change hands. Most people never see anything like it, and it can be overwhelming for first-timers.

But that’s part of the excitement of auction. It really is an experience like no other.

Embracing that excitement and truly enjoying the experience will help you keep a cool head. The alternative—freaking out—isn’t going to do you any good.

As a new bidder, do your best to stay calm and have some fun. If you ever feel you’re in danger of tilting, do nothing but watch. There will always be other auctions and other opportunities to buy foreclosures.

Be sure to check out the new foreclosure book I co-authored with David Osborn, Bidding to Buy. It’s available now on the BiggerPockets Bookstore.

Have questions about buying foreclosures at auction?

Post them in the comment section below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.