Property Auction – Pro Style

I mention how tough it is to find anyone who has a bidding-war strategy, but it’s because our expectations rose dramatically in 2010 after witnessing one of the best of all-time.

They were auctioning off a vacant lot owned by the City of Del Mar.

This video starts at the beginning of the auction, and the bidder at the bottom of the screen was a proxy for Carson Palmer – who eventually got the last laugh when he built a 6,580sf house on this lot and then sold it for $18,000,000 in 2020.

The auction starts at $1,000,000 – but watch how fast it climbs, particularly from $3,000,000 to $4,000,000. Did he have to pay that much? How about the guys in suits running around, the cameraman, and the auctioneer’s chant all contributing to the excitement. It was over before anyone could think!

Carson also paid a 10% buyer’s premium on top, so his final purchase price was $4,400,000:

The Buy of a Life Time!

Uncle’s House Part 2

Once we raised the list price yesterday, the message spread quickly. I still had a good turnout at my open house – about half of the amount of attendees that I had on Friday – but many came just to ask why the price changed.

Agents appreciated the transparency though, and they were quick to realize the benefits. If your buyer is only interested in paying $3-something, there is no need to go through the process of making an offer and getting your hopes up if there’s no chance of being in contention.

It’s part of the slow-motion auction. Give everyone a shot to buy the home and have full transparency propel the outcome.

Slow-Motion Auction Underway

There is no guidance on how to effectively handle a bidding war.

I don’t see or hear anything from NAR, CAR, brokerage managers, or team leaders on how listing agents should handle a bidding war, other than to put the offers on a spreadsheet and let the seller decide. But they are paying us a lot of money to give them advice, and that’s all we got? Embarrassing.

For realtors who think that’s good enough, then fine. Do you mind hurrying up with that retirement?

I made an offer on behalf of buyers last Thursday that was 6% over the list price. The listing agent won’t tell me how many offers they have, what price they are at, or even how the winner will be determined. After five days of waiting, we are left with nothing except “I’m trying to get you a counter” that came last night.

It never occurs to them that their inaction for days causes the buyers to cool off in the hurry. The agent will finally get around to picking a buyer they like, and the home will finally sell. But it won’t be for top dollar.

When I receive multiple offers, I’m transparent with everyone.

With our Cedarcrest listing, I’ve been telling every buyer and agent exactly what to expect. I encourage all of them to make a written offer, we will request their highest-and-best offer on Monday, and then find the winner on Tuesday.

Once the offers are in, usually half of them won’t submit a highest-and-best because they already did, or they cooled off quickly. No problem, and thank you for your offer.

We’re up to nine offers now, yet only two or three have expressed their sincere desire to buy this house. What a great filtering system to find the real players! Once I’ve confirmed with every agent that their highest-and-best offer has been received, I ask them if they want to go any higher – and tell them that if they don’t they are going to lose.

The efficiency is spectacular. The buyer-agents have the intel they need to literally tell their buyers, “If you don’t go higher, you’re going to lose out”. Every buyer would like that clarity in which to make a decision – yet every other listing agent thinks it’s better to keep them guessing in the dark for days.

A few will be startled by the transparency because they have never seen it before.

They think they deserve some favoritism because they are a cash buyer, or because they were first, or because their agent is a sweet-talker…..but what they really want is to score an off-market deal at a lower price because they see a lot of those happening – and they’ve never seen anything like mine.

Another agent asked about the action because she has a new listing coming in the neighborhood that is on the canyon side. She got what she wanted out of me, but then wouldn’t tell me anything else about hers, other than, “You’ll see it when it’s on the open market”. Great – we’ll see how she does vs. me!

4:40pm:

Compass Adds Auctions

I’ve pitched Robert Reffkin a couple of times about auctions. Even though he is the Compass CEO and running an operation of 30,000 agents and employees, he replies to every email!

He said they are working on the things that agents ask about the most.  Apparently, he’s getting more inquiries because Compass has partnered with Paramount Realty USA, a national auction house!

I doubt I’ll be using their service,  but it is fantastic to see autions becoming more mainstream. Hopefully they will be the primary way we sell homes some day. They wash out all the agent shenanigans and deliver the pure and most transparent way to sell a home.

Here are slides from their pitch:

Having buyers complete their home inspections prior to the auction would eliminate most of the problems we encounter now during escrow. Currently, the contingency of home inspection can screw up a sale in two different ways. 1) Buyers find unknown surprises and use them to their advantage to work over the sellers (again), and 2) Buyers aren’t as committed to closing the deal because they know they have contingencies that give them the ability to walk away, no charge. Auctions would wipe out all of the above.

But my favorite thing about the auction format is that it gives everyone a fair shot at buying the home, which isn’t guaranteed today…unless you list your home with me. I received four offers on my latest listing, and we have a winner:

Del Mar Lot Auction in 2010

Textbook example of how to run an auction – hit ’em fast and furious in the beginning to get bidders to jump, and hope for the best. It worked beautifully too, because I’m not sure there was more than one bidder. P.S. Carson Palmer was the buyer – he built a big bomber on the lot, and then got the last laugh when he sold it for $18,000,000 in 2018:

P.S. The buyer paid the 10% commission – purchase price was $4,400,000.

Auctions Now?

It would have been a good idea to launch the auction format on an industry-wide basis during the frenzy.  But how about now? They are still a good idea because auctions bring transparency and certainty to the home-buying process, which buyers would appreciate and make them more likely to engage.  Excerpts from article linked below:

If a home has been listed for a long time without much interest, it may be overpriced, according to Mr. Lesnock. During the pandemic, heightened demand has created bidding wars among buyers, with some prime properties selling within days of listing. If a residence isn’t getting any traction in one of the hottest real estate markets of the modern era, there’s a problem.

“Why is it not selling? It’s the windiest day on record, why is this kite not flying, right? That’s the way to think about it,” Mr. Lesnock explained.

The auction process also allows more transparency, according to Mr. Pchelintsev. Both buyers and sellers can follow the bids, either at a live auction or, increasingly, online.

“You get a notification on your phone. Someone just made a bid bigger than you, and you go, ‘how dare you?’” he said. “You go on and place a bigger bid and now you’re basically, apart from trying to get this amazing house, you’re also In sort of a little bit of a competition.”

That competition can help drive up the price of the property, according to Randy Haddaway, CEO and founder of Naples, Florida-based Elite Auctions.

“Sellers get more through this process than they would otherwise,” he said. “You get a group of millionaires competing against each other—and none of them are used to losing. They don’t want to walk away and that drives up prices.”

Mr. Lesnock agreed. “If you do [an auction] correctly, it will generate fair market or better prices.”

Link to Full Article

Mega-Auctions

The network insinuates that auctions are giving houses away, but the initial prices seem ridiculous:

Dr. Alex Khadavi, a celebrity skin doctor in Los Angeles, was hoping for a quick sale and big payday when he finally completed a 21,000-square-foot mansion that took seven years and tens of millions of dollars to develop.

But a little over a year after he listed it for sale — with a price tag featuring a string of lucky 7s at $87,777,777 — the doctor’s dreams of cashing out are being crushed by a mountain of debt, unpaid contractor bills, bankruptcy court proceedings and trouble with the law.

Now he’s running low on luck, money and time.

Khadavi, who filed for Chapter 11 bankruptcy protection about two weeks after putting the home on the market, hasn’t lost his sense of humor, though.

“The home is sandwiched between billionaires, and I’m the poorest guy on the block,” he told CNBC with a laugh.

https://www.cnbc.com/2022/04/19/mega-mansions-suffer-massive-price-cuts-at-real-estate-auctions.html

Online Home Auctions

I had a good conversation this week with the people at Doorsey, and they are well on their way to providing a sharp and effective online home auction platform that could change how homes are sold.  If/when Zillow buys them and provides online auctions nationwide, agents will be wondering what happened.

https://www.doorsey.com/

This article is from November:

https://www.spokesman.com/stories/2021/nov/05/spokane-based-online-real-estate-platform-doorsey-/

Excerpts:

Doorsey, an online real estate platform founded by a group of Spokane entrepreneurs, launched this week and secured $4.1 million in a seed funding round.

Founded by Jordan Allen, Nick McLain and Matt Melville, Doorsey is an online bidding platform they say takes the guesswork out of buying a home by providing real estate agents with real-time home prices and upfront sales terms and disclosures.

“Today’s home-buying offer process is rife with frustrations for all parties,” Allen said in a statement. “Buyers and their agents want to know whether their offer can win. Sellers and their agents want to know they’re getting the best offers. And agents want to close more deals in less time.

“Doorsey solves this by allowing sellers to define upfront what it takes to win, so that buyers can compete on a level playing field and sellers can find the right buyers.”

The co-founders sought input from the local real estate community and subsequently evolved the online platform into Doorsey, which provides buyers with such things as access to home-inspection reports, sale contingencies, photos, a 3D virtual tour via Matterport and a community forum for interacting with sellers and neighbors.

Buyers can also schedule showings and view desired closing dates on the platform.

Doorsey’s listings are posted on the Spokane Multiple Listing Service and distributed through national real estate websites, including Zillow, Trulia, Redfin and Realtor.com.

Doorsey has obtained $4.1 million in seed funding – an early stage of capital investment in startups – allowing it to build-out its product, hire more employees and expand to key markets nationwide within two years, according to the company.

The funding round was led by 166 2nd Financial Services with participation from Agya Ventures, Liquid 2 Ventures and SRM Development, among other investors.

Former NFL quarterback Joe Montana is a managing partner of San Francisco-based Liquid 2 Ventures, while 166 2nd Financial Services is led by former WeWork CEO and co-founder Adam Neumann.

https://www.doorsey.com/

Pin It on Pinterest