Home sale auction caught on tape

by Rob Regan on February 8, 2013

This live auction of a home is somewhere in San Diego.  Video by JimTheRealtor.  The comparable sales were all just below $400,000. Yet the winning bid was $411,500. In San Francisco terms that’s nothing. I’m seeing homes sell for $50,000 and $100,000 higher than the comps, and have heard of some multi-million homes selling for what many felt were $1 million and even much higher than the comps.

So which is better, this live in-person auction, or what San Francisco does with offer deadlines?

San Francisco offer deadlines are basically blind auctions. You present your offer with no knowledge of what the other parties are doing, or even how many you’re up against. On the one hand I know that in blind auctions the winners often far out-bid the next highest bidders.  On the other hand, you don’t know whether the buyers with lower offers would have come up in price if they had a chance, and if the bidding would have gone even higher.  I was in that position recently where a buyer said she would have gone up to $900,000 (we bid $850,000) but the listing agent accepted an $880,000 offer because 1) it was the highest initial offer, and 2) she was worried the condo would not appraise even at $880,000 and felt certain it wouldn’t appraise at $900,000. (note how Jim the Realtor handles that idea in the video).

In San Francisco’s blind auction offer deadlines often times there are a few offers that are neck and neck.  In those cases the Listing Agent and Seller either 1) picks the one they feel most comfortable with (more on that here) and either flatly accepts it, or negotiates some changes.  Or 2) the listing agent will “multiple counter” two or more of the buyers, or simply call the ones he/she wants to negotiate with and verbally negotiate one at a time until the Seller gets the desired price and terms.  This is more akin to what we see in the above video, but the “losers” don’t get a chance to participate.

The bottom line is I could argue in favor or against either style – at least from a Listing Agent and Seller’s point of view.  But I firmly believe the live auction is a far better option for buyers and buyer’s agents.  I can’t tell if some of the buyers or their agents in the above video left upset or not, but they spent about 10 minutes in the process before they “lost” and walked out.  In the San Francisco blind auction offer deadline style I often spend hours with my buyers crafting their offers, presenting them, waiting on pins and needles for the answer, and often, a listing agent won’t bother to reach out and let you know that you lost, or provide any explanation other than “we accepted another offer”.  This blind and low information situation is incredibly frustrating for buyers and buyer’s agents alike.

So what’s your opinion?  Thumbs up for the video approach, or thumbs down?

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