While logically there are many reasons to sell a house via the auction process, the biggest hurdle is the seller’s paranoia about giving their house away. Auction.com has been trying to develop a retail presence, but they are a long ways from gaining any traction.
Is there another solution that would offer similar benefits?
Yes, but first – what’s the problem with the current system?
Most realtors will sign up a seller to a 3-month, or 6-month listing period.
We charge a lot of money, so sellers expect a full effort. They want their realtor to spend lavishly on fancy ad campaigns and, well, do whatever they do to sell houses for top dollar.
Sellers make plans to wake up in a month or two and have a nice young couple with 2.2 kids make an offer very close to list price.
What really happens?
The listing hits the MLS, and if the photos are decent and the price is within 5% to 10% of being right, the house is over-run with buyers the first week.
The sellers go into shock at the thought of this moving so fast, and their automatic reaction is to think that they must be selling it too cheap.
This year, 37% of the houses sold in SD’s North County Coastal region went pending in the first ten days.
But as hot as the market has been, we could have sold twice that many homes in the first ten days, if sellers were properly advised – because most were within 10% of being right on price, and buyers desperate enough that they have been willing to pay higher than ever before (they are comfortable paying full price or more if needed).
Redfin reports that 71% of their offers made last month by San Diego agents were faced with multiple bids – there are plenty of buyers, it is a very competitive market, and they rush to see the new listings.
But what happens frequently is that sellers don’t sell for top dollar in the first few days – though they should, because that is when urgency is the highest, and buyers have little bargaining power. Instead, sellers drag their feet, and risk trying to get top dollar once their listing goes stale.
Sellers want to wait for days or weeks (or months) before responding to see what else might come in, or if they get multiple offers, their agent fails to handle it properly and either gives it away, or tilts the table.
One thing could fix it all – the 10-day listing.
The benefits:
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It is more obvious to the sellers that they are going to sell their house in the first few days. They prepare the house, endure a heavy showing schedule, and they expect offers!
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Buyers are more engaged because they think the seller is more motivated and ready to sell.
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It would be more likely that the sellers will resist adding a big surcharge – the Not-Giving-It-Away tax that sellers sneak in at the last minute, thinking they have months to test the market and lower the price later if it doesn’t work. What’s wrong with the Not-Giving-It-Away tax? Buyers quit coming around after 1-2 weeks, and sellers lose interest and decide to never lower the price.
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It would force realtors to be on their game, and give full attention. Would it surprise you to hear that a realtor who just signed a six-month listing doesn’t have everything ready to go on Day One? How many times do you see a new listing thrown haphazardly onto the MLS with lousy or no photos, no showings for a week or two, and few remarks?
- It would cause sellers and realtors to plan ahead for multiple offers – it is ridiculous that as an industry we have no standard format to handle a bidding war, and many agents struggle with it because they are inexperienced and there is no guidance anywhere. As a result, they tend to just grab an offer, instead of pitting the bidders against one another (like an auction does).
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It would lower commissions.
The reasons that auctions work is that the buyers get goosed up thinking they are going to buy a house today, and tend to pay more than they expected. Transparency is the key – and while home sellers aren’t quite ready to auction their house just yet, the 10-day listing would be the next best thing.
If you like this idea and want me to list your home for ten days at a lower commission rate, I will do it – contact Jim the Realtor today! 858-997-3801 or jim@jimklinge.com.
You’re going to get offers in the first 10 days anyway, you might as well plan for it, and hire the right guy for the job!
Great idea.
I’m still seeing lots of overpriced turkeys sitting for months in the neighborhood.
Idea based upon your reporting:
“37% of the houses sold in SD’s North County Coastal region went pending in the first ten days.” ~JtR
Seller inquiry. Pre-offer interest. Set IPO. Explicit declaration of interest. Formal acceptance deadline.
Advantages; buyers are given a time frame. Sellers are given a time certain. Intermediaries are given a closed end contract.
Heck, if it doesn’t work just list on the MLS and do it the old way.
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This is just a suggestion. My purpose is to stimulate conversation and level the field. I can see all kinds of objections by those who get properties cheap or sell them dear because their attempts to circumvent maximum exposure are thwarted.
Yes, this is a transparency play.
Let’s quit lying to sellers, conning them into thinking that the full-page ads in Dream Homes Magazine is what’s going to sell their house.
Let’s quit trying to justify a 6-month listing by telling sellers that it takes longer to sell a premium house.
It DOESN’T take longer to sell a premium home, those are the most in demand. The reason the average market time is longer for high-end homes is because listing agents promise the moon, price-wise, to get the listing, and it takes longer to talk the seller down to reality. Period. No other reason.
Even with the glut of high-end homes in NSDCC (70% of the homes for sale are over $1,200,000) the average market time for all detached-home sales this year is 44 days.
44 days – that’s it.
I like the idea. There’s probably some price point where it isn’t feasible but it should work for any track home up to about $2 million. There isn’t necessarily a pool of active buyers looking for a $25 million dollar property in La Jolla.
A sellers only shot after they exhaust those first couple days of urgency is to get lucky because a new naive buyer with a sense of urgency just entered the pool. I guess you can hope for the Silicon Valley mid manager type to relocate down here and think 1.2 million for 3500 sf is dirt cheap compared to SV.
10-day listing. Brilliant insight, Jim! I agree it shouldn’t take longer to sell a premium house. Just get the right agent and set the right price from the get go…
PS I think sellers freak out at the beginning because who wants to endure the nightmare of packing up all your stuff? It’s awesome to move into a new house, but the idea of filling empty boxes with stuff from your old house? I can still remember staying up 40 hours straight when I moved from CA 3 years ago (utter nightmare)…
Agreed, but with the 10-day listing sellers have certainty about WHEN they will open escrow, and can start worrying about planning the rest – instead of having no clue, then wham, getting hit in the head with multiple offers.
Back when I started, we got the MLS books every Friday – houses one week, and condos the next. Yeah, it took longer then.
But it is different now, and sellers are smart to recognize the BIG change brought by the instant notifications – once you are in the MLS, everyone knows about you and your house within minutes.
Put an attractive price on any decent house in NSDCC and go sit out front. Within an hour of hitting the MLS, multiple people will be driving by for a look.
I like the angle, and the 10 day contract is attractive to create a buzz, but really what you are addressing, at its core, is listing agent sloppiness. A professional listing agent will have it all ready to go on day 1, and if priced correctly, will sell it in the 10 days (in this market)regardless of the length of the listing agreeement. Of course the 10 day timeframe could provide extra Seller motivation to prepare the house as well, de-clutter, fix and stage since they know “this is it” and they need to be ready. At the end of the day, though, it is all about price. The rest is fun to talk about, but is highly secondary. The OPT’s sitting out there wouldn’t have fared any better being on the market for 10 days. Though it would spare the listing agent the disgrace of having to hold it open a 5th time to entertain the crickets.
While we are discussing bidding wars, let’s recap the RSF listing from last weekend.
We were listed at $3,095,000 for almost a year, and didn’t have a showing during the last 6 months, which by most measures was the hottest market in the history of real estate.
The loans add up to $2.6 million, and the 1st lender didn’t want to give them a loan mod because they are flush – so they file an NOD instead.
Seller gets ticked; we had BPOs around $1.95 million, so we change the price to that and figure the bank knows the worth and should sign off on a short sale. The seller would at least be relieved of $700,000 in debt and go rent at half the price.
I conduct open house, and 100 people show up, and offers start flying.
I do my usual job of price coaching and pitting the bidders against one another, and end up with two cash offers at $2.2 million, and one cash offer at $2.25 million, which would have paid the first lender in full.
We look at rentals on Sunday, and you’d be surprised to see how little you get for $8,000 to $9,000 per month around the Ranch.
The seller decides to stay put, and wait until the value goes up a little more to cover the second loan too so he doesn’t have to short-sale.
For doing a good job I get nothing, but I’d rather have that then be lazy like most and just grab the first offer, (or the first offer I wrote), and process the short sale under $2.0 million and leave the seller hanging.
10-day listing. Brilliant insight, Jim! I agree it shouldn’t take longer to sell a premium house. Just get the right agent and set the right price from the get go..