Would you buy a house through an auction?
The auction format would reduce the chances of shenanigans taking place. In today’s market, with short sales growing and manipulating agents causing more suspicion, a pure shot at buying a house would be appreciated.
I think the auction format could catch on, and with some luck become a primary resource for buyers and sellers. It would take the right ingredients to build the trust necessary:
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No reserve price – highest bidder buys it. (or a low reserve to give bidders guidance)
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Inspection report made available to all buyers.
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Property is vacant and open 9-5 for inspection the previous two weekends, and on lockbox.
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Open bidding where you see the competition eye-to-eye, or a sealed-bid process.
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Seller pays 3% commission to buyer-agents, not tacked onto price as a ‘buyer’s premium’.
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Preferred financing available with seller buydowns.
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Have the whole package bundled up and broadcast over the internet on Jim TV!
Include a full photo and video display on the first day of the listing, and have the entire production coordinated by an established long-time realtor with good looks and dazzling personality, and it could take off just for the entertainment value alone. But it’s the purity that would be attractive to the those watching, and make them more comfortable with participating the following week.
You see more of them around, here’s a couple of recent examples:
It’s a nice world that you’re dreaming of, Jim.
But it will never happen. There is just too much BS in the real estate industry for anything to work with the intellectual honesty and transparency that you’re describing.
Where is that first one? VERY nice setting but those the tower of death kills it for me. I love the pool area with the trees in the background…very nice.
NY Times from 10/8: “After Foreclosure, A Focus on Title Insurance”
Full article:http://www.nytimes.com/2010/10/09/your-money/mortgages/09money.html?pagewanted=1&_r=1&nl=your-money&emc=your-moneyema2
Anyone wonder if there will be a ripple effect from the banks stopping foreclosures?
I think you can add:
8. Reliable Auction Date
to your list of criteria. I’m not really considering buying a house right now, but for people who have to get financing lined up, an unexpected postponement or cancellation seems like a heart breaker.
ripple effect
I think Boone’s Farm is their preference…
This MERS thing should drag on for years, unless the REIC convinces Uncle Sam to come to the rescue again with another big bailout.
On those properties already foreclosed and resold, one party will get the house, and the other will get a bonus check from the government?
More on foreign investors – these in NYC:
http://www.nytimes.com/2010/10/10/realestate/10cov.html?hpw=&pagewanted=all
“There were two main obstacles,” he said. “The Chinese government does not allow currency exports over a certain amount, and for those who could get around those banking rules, there were concerns about getting a visa.”
Many foreigners, not just the Chinese, complain about the strict enforcement of visa regulations by the United States since Sept. 11, 2001.
China is one of the two markets that most interest Manhattan brokers. The other, India, also restricts the amount of money that can be taken out of the country.
While some wealthy Chinese and Indians have overseas bank accounts, many do not. Those without must find creative ways to put together the cash they need when they shop for properties in the United States. For instance, Mr. Cosentino says he has worked with Indian buyers who give five or six relatives $100,000 each to send out of the country — the maximum allowed for an individual — so they can make a down payment.
South Americans, she said, have a different standard for economic instability. “You have to understand that for buyers coming from South America, this is not a volatile market,” she said.
Joe, that auction house is in northern Carlsbad, east of El Camino Real. It was on the market not too long ago with water damage and I think foundation issues.
“Have the whole package bundled up and broadcast over the internet on Jim TV!”
LOL!
And it could work. It would definitely raise the level of accountability in the real estate industry.
In fact, I sold my condo in a very similar manner. I had three people bid on my old place on the very same weekend, and I accepted the highest bid which was only $5K below my asking price.
Jim, definitely study the possibility of becoming a real estate auctioneer. It could become a new line of business, one where you’d be the dominant player.
The problem with home auctions is precisely because there is a reserve price, there are shill bidders, shill bidding is legal, all attempts are made to hide defects and they are off the hook for them, all attempts are made to pass every cost to the buyer and not the seller, and if you complain about any of the shady things I mentioned they’ll just point to the fine print where it says they can do exactly that. The game is rigged and they don’t care if you know that, all they need is enough suckers to clear inventory. They’d rather lawyer up on all those shady practices than switch to an honest auction style.
How can you convince someone to switch to a more open and honest system without some incentive and advantage? Clearly they’re getting enough buyers who will put up with all of that under the current system.
I like the sealed bid idea.
How can you convince someone to switch to a more open and honest system without some incentive and advantage?
The TV show is the clincher.
Once people can see it happen live, they’ll be more likely to trust the process.
Each sgement opens with a live video tour of the house, a review of the comps and inspection report, and then a Brooke Burke lookalike describes the format.
I’d ditch the fancy auctioneer cadence, and just repeat each bid clearly, and see who wants to beat it.
You can buy a house that day (after your inspection instead of before), and benefit from seller-paid loan incentives.
Just go home and start packing!
9. clear title
This is one thing that would inhibit me from buying at auction. A pro can deal with it, an amateur not so much.
(and this is before the current drama)
Title insurance would be included.
Could you live with a $10,000 non-refundable deposit, due the day of auction?
You’ve already priced in any repairs, and are approved for financing.
Maybe non-refundable-unless-the-appraisal-comes-in-low?
Listing a house clean and slightly lower than market price is almost equivalent to an auction, especially list agents market it properly with lots of good pictures, accurate description, and timely open house.
For some mischievous reason, I’m getting images of one of those ridiculously over-produced evening game shows — something like The Weakest Link, with Anne Robinson as host.
P-P-P-POWERLINES!
This was a short sale. We had 2620 Chestnut under contract at 320k with the intent to Rehab and sell. We cancelled due to major slab issues and the home owner nearly shot me when I jokingly asked if I could rip up her carpet to take a closer look at it. The Rehab was probably no less than 90k so if they’re all in at 415k it better be a home run!!! Good luck with the Auction..
Just got back from Napa, CA looking at properties. Same things happening up there. Nobody knows what the market really is and the “owners” what offers well below asking. Where will this end?
I’ve never understood the attraction of sealed bids. I’d rather know who I’m up against and what they’re offering; if I win I want to win by a small margin, which can be a far cry from my best offer.
Love the idea of an auction, but think sdbri brought up some good points in #10.
Buyers would have to feel like they are not being played WRT shill bidders, undisclosed defects, etc.
If there were a completely transparent, open, honest way to do it, I think it would take off.
“I’ve never understood the attraction of sealed bids. I’d rather know who I’m up against and what they’re offering; if I win I want to win by a small margin, which can be a far cry from my best offer.”
A sealed second-bid auction (a.k.a. vickrey auction) has nice theoretical properties. In that process, the highest bidder pays the amount of the second-highest bid.
“all attempts are made to hide defects and they are off the hook for them, all attempts are made to pass every cost to the buyer and not the seller, and if you complain about any of the shady things I mentioned they’ll just point to the fine print where it says they can do exactly that”
Insurance is one possible answer. Have some third party offer $10,000 payout per $x paid in insurance if the foundation is cracked or tilted, there’s a termite infestation, bio-disco under the sink, or dry rot in the floor joists, or whatever.
Jim, Google TV should allow you to do your own network show on TV. Seems like that is the next step for this blog. Then you can expand into doing live things like auctions, live tours, Q&As, etc, and people can watch it all on their 55″ LCD TV at home.
I think that it would bring a lot more confidence into the RE world. Shenanigans would be eliminated for the most part.
What did the first place in your video end up going for?
I don’t think it has sold yet – auction is this coming Sunday?
Jim I think that would work except it requires talented people running the auction. And I’m sure those people have better money to make, like selling houses.