What if I’m the backup bidder on an auction?
Sometimes an auction ends, but the highest bidder isn’t the only one presenting their high bid. You may be approached as the second highest bidder, or backup bidder, to present your high bid to the seller.
Let’s see an example of how this works:
Say you’ve participated in an online auction, and you bid alongside other potential buyers. At the end of the auction, you come in as the second highest bidder (known as the backup bidder).
Usually, the bid of the highest bidder is presented to the seller for consideration and acceptance. But on some occasions the highest bidder may fall out. Then, you (the backup bidder) will be asked if you want to present your bid to the seller. At this point, you can say yes and move forward with presenting your high bid, or you can say no thanks and remove your bid from the table. (Please note that not all backup bids will be presented.)
Things to consider when bidding in an auction
Here are a few things to keep in mind when bidding—especially in case you end up being the backup bidder:
- The auctioneer will disclose any new details about the property learned during the exchange between the seller and highest bidder.
- It is at the auctioneer’s discretion to move on to the backup bidder if the highest bid falls out. In some cases, the auctioneer will suggest that the seller not entertain any additional bids and put the property into a new auction. This usually happens when the backup bid is simply too low for review.
- If you bid in an auction, it’s important to only bid up to an amount that you can commit to if you are approached as the backup bidder.
- We highly recommend doing as much research as you can before bidding on a property at an auction, so you know how much it’s worth to you. Learn more on how to conduct your due diligence.
- Make sure you have all your documents ready in case you end up being the backup bidder. These include:
- Proof of funds, current within the past 30 days from a financial institution or hard money lender (in some cases, sellers will accept pre-approval letters but not pre-qualified letters on financeable properties)
- Confirmation that there will be no delays or contingencies, like appraisals or inspections
- The legal entity documents ready for transfer of title if vesting with an entity
Don’t be discouraged if you are outbid during an auction! You never know— you could be approached as the backup bidder and buy the property you’ve invested time and energy in researching.