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Category Archive: ‘Auctions’

One-Story Premiums

2016-04-10 15.23.25

Richard and I were discussing the phenomenon of houses selling for prices that are well-above comps – and how they almost always end up being all-cash sales.

Back in the day, the cash buyers always demanded the best deals – figuring that because they were paying cash, they somehow deserved a better price.  But today, cash buyers are throwing around big money to get what they want.

What do they want?

What do they need?

We know that the one-story homes have always been popular, especially with seniors. Guess who has all the money? Yep – the older set.

But there is more to it. Buyers get pickier as prices go up, and now they want everything.  You can’t blame them – we are at record prices!

My rule-of-thumb has been that one-story houses sell for a 10% premium over two-story houses. But I think the gap is increasing, and for single-level houses that also have the other valued features like 3-car garage, view, and a low-maintenance but attractive yard, there is a combo premium too.

Part of the pricing pressure is due to the inventory differences. Here’s a look at South Carlsbad over the last six months:

Detached-Home Listings in 92009 and 92011

ACT Listings
Avg. LP/sf
SOLDS last 6 mo.
Avg SP/sf

If you prefer one-story homes, there aren’t many to consider, and the cost-per-sf premium of the solds is 24%!

When analyzing the comps, you can’t compare 1-story and 2-story homes together – they are two separate markets.

Here are two examples of one-story homes listed yesterday:

6678 Cabela, Carlsbad, 92011

6387 Huntington, Carlsbad, 92009

You can buy two-story homes that are 600-800sf larger nearby for the same price – or less.  But because both of these have other premium features (views, lower-maintenance yards, 3-car, and no pools), and the selection of one-story houses is scant, these two stand a good chance of selling promptly!

With 10,000 baby boomers turning 65 years old every day, it’s understandable that one-story homes are fetching a premium, which today appears to be 10% to 20% above two-story homes.

What is the combo premium for the one-story houses with the extras?  It has to be another 10% minimum, and for those that have it all, there is no ceiling.

It means that the method of selling will determine the outcome.

If the seller hires a regular realtor who compares the super-duper one-story to other two-story homes nearby, there will be money left on the table.

This is where the auction format could really pay off. Bidders are uncertain about calculating the value of the extra features, and getting them into a competitive environment will cause them to pay whatever it takes to win.

Get good help – hire a realtor who can evaluate the premiums, and create an auction-like format to ensure top dollar!

Posted by on Jun 11, 2016 in Auctions, Boomers, Jim's Take on the Market, Market Buzz, Market Conditions, One-Story | 1 comment

China Real Estate Update

frantic homebuying

The government lowered the down-payment requirements and cut transaction taxes in half – and the market took off.  Look at the photo above!  Can you imagine a marketplace where bidders are shouting over the counter? I can!

Let’s auction!

P.S. My blog post #5 today. Look out!

An excerpt:

Resale prices have also surged in tandem with the latest housing boom in Beijing, Shanghai and Shenzhen that saw home prices rise 20 to 30 percent since the Chinese Lunar New Year (Feb 8th). In my neighborhood, three-bedroom apartments now cost 6-8 million yuan, or about eight to 10 times more than what they cost when the estate was launched eight years ago.

My cell phone has been ringing now and then with calls from agents who urge me to sell my duplex apartment and upgrade into a luxury home. But I’ve seen too much to budge even with the regulators’ warning to ease the pressure, like acting hard against easy home loans for low-down-payment mortgages.

Probably anyone familiar with the housing market would doubt if developers and agents who assist buyers with the loans, were the main culprit for the unexpected wave of property buying.

For some young buyers, it’s common for their parents to dish out the down payment, assuming they will repay in the future. But many more would offer to pay in installments over several months during which they could sell their current houses and arrange for loans?such as loans from developers and agents?in case of a shortfall. The danger of a looming US-style subprime crisis might have been largely exaggerated.

Instead, a spate of property easing measures, easy credit, concerns about shortages of housing supply and recent stock routs have worked together to unleash some residents’ pent-up demand for nicer and bigger homes in major cities.

For example, to encourage people to buy houses, interest rates have been lowered and transaction tax on bigger flats with a size of at least 140 square meters, has been cut from 3 percent to 1.5 percent, which means steep savings for buyers because such deals usually involve several millions of yuan.

The market’s return back to life has also reinforced the popular belief that housing prices will only go up. Over the years, the government has tried to curb price rises by imposing a series of conditions on purchase. But each time, after a short, slight dip, prices have rebounded with a vengeance, leaving those wishing for big falls cursing their gullibility and slow moves.

After the stock turmoil last year, property proves again to be the best investment vehicle that the wealthy could park their funds in and middle-class urbanites build their nesting eggs with. While many homebuyers laugh their way to the bank, most stock investors have experienced anger and regret after their money evaporated in market meltdowns.

Posted by on Mar 21, 2016 in Auctions, Jim's Take on the Market | 0 comments

Auction Update


Auctions have a seat at the house-selling table, and their ultra-low opening bids are eye-catching for buyers hungry for new product.  Will one player emerge from the pack to dominate the space, or will every realtor be offering an auction option some day? These guys are figuring it out – it’s better to cozy up to agents, rather than try to replace.

From the

The hors d’oeuvres and drinks were flowing at an broker party in Midtown last week when Rick Sharga shushed the crowd of commercial real-estate brokers to explain to them why the online property-sales service is their friend, not their competitor.

About 75 brokers from the New York region were at the event, lured in part by’s promise to give away five $1,000 gift certificates. The service—one of the largest online property-auction sites—also is offering brokers $5,000 for simply listing one of the properties they represent on the site, whether or not it’s actually sold.

“We believe the best model is a hybrid model” that combines traditional brokerage and’s online bidding service, Mr. Sharga, an executive vice president with the firm, told the crowd. is launching a major push to develop stronger ties with brokers as part of a broader effort to expand its commercial-property business. The firm, which started online real-estate auctions in 2008, has been listing commercial property since 2009.

But so far its volume has been dominated by residential sales.

The firm expects to sell 1,000 to 1,500 commercial properties this year and 50,000 to 60,000 homes.

Read full article here:

Posted by on Nov 16, 2015 in Auctions, Jim's Take on the Market | 0 comments

Boomer Auction

auction house

A 15-bedroom American mansion with a guitar-shaped driveway has gone up for auction – with a starting bid of $0.

Seven Montagel Way will go under the hammer on October 31.

The 27-acre property in Shoal Creek, Alabama comes with a horse riding arena and a fitness centre.

The impressive 16-bathroom property includes a decadent foyer with ceiling murals and crystal chandeliers.

It also boasts a screening room with a 170-inch screen, theatre-style seating for 25 people and an authentic box-office, a commercial-grade elevator, a wine cellar with shelving for 2,000 bottles and a game room.

In 2011 the property was listed for $17.9 million (£11.67million) by owner Larry House – the former CEO of MedPartners, a firm that supplies staff to hospitals and medical centres – but he removed it after it failed to sell.

Last year, the house was put on the market again for $13.9 million (£9million). At the time, Pam Ausley, the listing agent, said the property awas too big for Mr House.

She said: ‘Their kids are grown, and they’re just ready to do something different. He knows it’s not the best time to sell, but he’s just ready.’

Mr House also put the property up for auction in 2003 but bought it back when it sold for just $3.95 million (£2.57million).

CEO and founder of DeCaro Luxury Auctions, Daniel DeCaro, said: ‘Inspired by historic French and Italian castles of Europe, architect Bill Shepard designed 7 Montagel Way to feel like a traditional palace in Versailles.

Read more: LINK

Posted by on Oct 15, 2015 in Auctions, Boomer Liquidations | 0 comments

Auction Select


I keep hoping that the auction format will take hold, and at least become one of the choices for sellers to consider.  The Harcourts hubbub has settled down – I haven’t seen or heard of any of their auctions lately – but is finally sticking their toe in the water.

They are beta-testing their Select division, which is a happy blend of an online auction and regular transaction terms.  From their website:

  • A Buyer’s Premium of $2,000 will be added to the Winning Bid amount to determine the Total Purchase Price (TPP).  The buyer is responsible for paying the TPP whether using financing or cash to purchase the home.
  • An Earnest Money Deposit of 1% of the Total Purchase Price, or $1,000, (whichever is greater), is required at the time you execute your Purchase Sales Agreement.  This $1,000 will be applied towards your closing costs and/or down payment at closing.
  • A Buyer’s Broker Commission of 2.5%, or $1,200 (whichever is greater) is available to registered Buyer’s agents/brokers.  Click the Agent/Broker Info link at the bottom of this page to find out how agents/brokers can register to be eligible for commissions.
  • A 15-day Finance Contingency is available for qualified buyers who intend to purchase using financing.  To learn more about finance contingencies, view our FAQs.
  • An Inspection Contingency is available on this property as follows:  A 10-day Inspection Contingency is available for financed transactions, and a 7-day Inspection Contingency is available for cash purchases.  Find out more about inspection contingencies on our FAQs.
  • Buyer may request a Seller Concession credit of up to 3%, not to exceed Buyer’s recurring and nonrecurring closing costs, for all financed purchases.  View our FAQs for more information on seller concessions.
  • Buyers will receive insurable title upon successful closing.  View our FAQs for more information on title insurance.
  • If Buyer uses the Seller’s designated closing company/agent, Seller shall pay the Buyer’s title policy premium for a state-specific standard owner’s title policy.
  • Until the Seller’s reserve price is met, may counter bid on behalf of the Seller.  Counter bidding gives Buyers and Sellers more flexibility to find a mutually agreeable price. Counter bids do not occur after the Seller’s reserve price is met.

They just couldn’t resist the last paragraph, and it’s one that will likely be a turn-off to casual bidders. But unless they get to the reserve price, who cares – if their shill has to try to bid it up in order to hit the reserve price, then the buyer can always say no.

But they’ve only had five listings in the state so far:

The online aspect sounds convenient, but it’s the live event that makes it worth it.  The live auction is where buyers might get hyped up enough to bid a little higher than they thought, and be more likely to hit the reserve price.

They have Google behind them:

So if the beta-testing works out the bugs, and Google can spend millions on advertising it, then the Select format could be what brings residential resale auctions to the masses.

If they could incorporate a platform where ANY listing agent could utilize the service and have it be friendly to all, then we’d really be cooking!

Posted by on Sep 21, 2015 in Auctions, Jim's Take on the Market, Listing Agent Practices, The Future | 4 comments

Reverse Auction


Hat tip to DH for sending in this article:

An excerpt:

“Going … going … gone! Seller will reduce price by $50,000 every day until sold,” said an ad that Coleen Brennan of Engel & Volkers ran in the Los Angeles Times in June.

The price kept dropping – in all, some two dozen times – until it hit $12.74 million on July 7, the Multiple Listing Service shows. A little over two weeks later, the property went into escrow.

While this reverse-auction type strategy is intended to create a sense of urgency among buyers, it can be risky, too. What if everyone just keeps watching the ax swing? The seller could wind up having to take the house off the market again.

But that wasn’t the result here.

On Friday, the deal closed. Sale price: $12.54 million.

Read full story here:

Posted by on Sep 15, 2015 in Auctions, Jim's Take on the Market | 3 comments

Commission Conflicts

kayla 010

Do realtors steer buyers to listings that pay higher commissions?  This new study by NBER says we do – I chimed in at the comment section:

Maybe it’s my rose-colored glasses, but doesn’t it seem like every issue facing realtors can be solved with the auction format?

Posted by on Sep 3, 2015 in Auctions, Commission War, Jim's Take on the Market, Realtor | 5 comments

Preparing Your Home for Sale

Reader 3rd Gen SD sent this in yesterday:

JtR, have your sales and experience led you to a percentage of listing price that should be devoted to making deferred maintenance and aesthetic updates? Perhaps a suggested metric other than percentage of LP?

To wit, I’m sure there are some listing agents who would love for their clients to dump as much cash into the front end as they can. No skin off the agents’ backs, right?

Hypothetical: If a CMA led to a listing price of 800K, would you advise your client to invest 8K, 16K, 24K toward making it truly marketable?

Am assuming paint and flooring, kitchen and master bath updating if needed, but there has to be a point of diminishing returns. I mean, there are “cream puffs” and there are “cream puffs”…

Any general guidelines you’d care to share would be appreciated.

General guideline: Make the house look and smell clean.  Add new carpet and paint, do a thorough cleaning, and remove all clutter and half the contents. Include staging to provide emotional appeal and make it memorable.

Let’s go back to his paragraph two.

Not that anyone reads the contracts (principals or agents), but our listing agreement encourages sellers to consider all offers.   But once the home is on the market, sellers tend to dig in on price.  Their family, friends, and neighbors have seen the price, and sellers feel the need to defend it – at all costs.

It’s not necessarily a conscious thing – it is human nature….in this society.

It is miraculous that buyers are willing to satisfy the sellers’ demands approximately 3,000 times every month in San Diego County (3,568 detached and attached-home sales last month).

Agents hope that trend continues and are willing to list a home for sale at no cost to the seller.  Yes, we can score a big bounty at the very end if we can get buyers and sellers to the finish line.  But we do so without having a vote on the eventual sales price.

From Paragraph 7 in our listing agreement:  “Seller is responsible for determining at what price to list and sell the Property.”

It happens regularly that a listing agent will spend weeks, months, and sometimes years trying to sell a house.  They may procure several offers, which would seem to indicate what the market will bear.  But the seller has no obligation unless a full-price offer is produced.

To tie it back to 3rd Gen’s question – Because every seller wants to sell for the top of the range of what homes are selling for in the neighborhood, agents are smart to tell them to buff it out before listing.

If sellers were willing – and committed – to sell for what the market will bear, then we could throw a house on the market in any condition and see what it’s worth.

But most sellers won’t sell for any price – they want to sell for their price, regardless of what the market will bear.  Thus, fixing them up improves everyone’s chances of a successful sale.  You’ve seen me personally get involved in the improvements too – I know it helps our chances!

If we could all understand and agree that a house will sell for what the market will bear, it would change everything.  But instead, sellers are motivated to hire the agent that quotes them the highest price, regardless of condition.   Some do the fix-ups, and some don’t, and then buyers are left to figure out the rest.

Another reason why realtors should be proponents of auctions!

Posted by on Aug 14, 2015 in Auctions, Jim's Take on the Market, Listing Agent Practices, Why You Should List With Jim | 2 comments