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.
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!
Buyers are more engaged because they think the seller is more motivated and ready to sell.
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.
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).
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 firstname.lastname@example.org.
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!