Walking away is the hardest decision in property buying — practise it here, not there
This exercise puts you inside a realistic auction where bidding passes your ceiling. You will rehearse the moment where every instinct screams "just $5,000 more" so the first time you face it is not on the day with $1,500 already spent and your heart racing. The concepts in play are , , , and the you set while calm.
Of those who exceeded their budget:
- 18% went more than $50,000 over, adding over $3,500 per year to their loan repayments .
- 65% of first home buyers report being in or expecting .
- 45% of recent first home buyers regret their purchase, most commonly because they paid too much .
These are not reckless buyers. They are people whose ceilings moved on auction day, one $5,000 increment at a time.
Your ceiling is the number you set when your brain was working
You are a first home buyer with pre-approval for $850,000. After running the numbers on your income, bills, and lifestyle, you have set a of $820,000. That is what you can afford without eating into your emergency fund or sacrificing the things that make life worth living.
You have found a 3-bedroom house in Reservoir, in Melbourne's north. The price guide is $750,000 to $800,000. You have already spent $1,500 getting ready to bid — $500 on a building inspection, $350 on pest, $400 on your conveyancer reviewing the Section 32, and $250 on a strata search. The building report came back clean. The pest inspector found no issues. Your conveyancer flagged nothing unusual. You love the house. Your partner loves it. You have pictured your furniture in the living room.
Why "just $5,000 more" is never just $5,000
The auctioneer opens at $700,000. Three bidders push the price to $760,000. You enter at $770,000, two bidders drop out, and now it is you and one other couple trading $5,000 increments. At $810,000 you are the highest bidder. They bid $815,000. You bid $820,000 — your ceiling. The auctioneer turns to them. They pause. Then: "$825,000."
Your brain is telling you three things at once:
- 1"It is only $5,000 more." Research on auction behaviour shows this is exactly how overbidding works — each increment feels small in isolation . Bidders who go $5,000 over are significantly more likely to go $10,000 over, then $15,000, because the same logic ("it is only a little more") applies at every step.
- 2"We have already spent $1,500. We cannot waste that." This is the trap. That $1,500 is gone whether you buy this house or the next one. It should have zero influence on whether you bid $825,000 or walk away .
- 3"We might not find another one this good." — the psychological tendency to feel losses roughly twice as strongly as equivalent gains — makes the prospect of losing this house feel devastating . But you are not losing a house you own. You are choosing not to buy something you cannot afford.
The danger is not the first $5,000. It is the second and third. If you bid $830,000 and they go $835,000, the same logic applies again. Participants in auction experiments consistently overbid when their arousal levels were elevated, even when the arousal had nothing to do with the auction itself .
The real cost of a $25,000 overbid
Say you end up at $845,000 — $25,000 over your ceiling. At the current average variable rate of 6.10%, that extra $25,000 costs you roughly $54,800 in total repayments over 30 years . That is $1,827 per year, or $152 per month, for three decades.
That $25,000 over your ceiling may also push you into — the point where more than 30% of your gross income goes to repayments. Two-thirds of first home buyers already report being in or expecting mortgage stress . And if you are eligible for a First Home Owner Grant or stamp duty concession, overbidding can push you above the eligibility threshold — in Victoria, the stamp duty exemption applies up to $600,000 with concessions up to $750,000, so an extra $25,000 at the wrong band could cost you thousands in lost concessions on top of the higher purchase price .
The fourth option most buyers miss
There is an option many buyers overlook. If bidding does not reach the vendor's , the property is — it has not sold. The highest bidder gets first right to negotiate with the vendor after the auction . This negotiation happens under private sale conditions, which means you may be able to include a and conditions such as finance approval . If the property passes in at $825,000 and the reserve was $830,000, you might negotiate a price of $820,000 to $825,000 with conditions attached. This only works when the property actually passes in, so the walk-away decision must be made on its own merits, not on the hope of a pass-in.
Walking away feels terrible — and is almost always right
You shake your head. The auctioneer asks if you are sure. You say, "No, we are done." You walk to the car in silence. It feels terrible. That evening, you second-guess yourself. For the next week, you check the listing to see what it sold for.
This is normal. It is also temporary. What is not temporary is 30 years of repayments on a house you paid too much for. Your $1,500 in due diligence? You would have spent that money regardless. Those reports told you the house was sound — they did their job. They were never a deposit on a future purchase. You keep looking. Two months later, you bid at another auction, or you find a house through private sale where you can include conditions.