An online auction to sell real estate? Maybe it will catch on!
Gone are the days of the quick talking auctioneer, paddles and shouted bids. Today, San Diego County Treasurer-Tax Collector Dan McAllister announced he is moving the annual property tax sale auction online.
“With this new system, people sitting at home can browse and bid on more than 1,600 properties currently available, including timeshares starting at $900,” said McAllister. “The online auction aligns with our ‘e-nitiative’ to make it easier and more efficient to do all business with us electronically.”
The online tax sale auction will take place May 5-10. Interested buyers can register as a bidder beginning April 5, and registration will end April 27. Bidders must put up a $1,000 advance and a nonrefundable $35 bid processing fee.
“Moving this tax sale online will cut our operation costs compared to a live auction,” said McAllister. “We also hope to sell more properties as we open the auction up to bidders outside the San Diego region – even around the world.”
All sales are final, so this is a buyer beware sale. Before April, the Treasurer-Tax Collector’s Office (TTC) encourages everyone to research the selection of available properties by clicking here.
Right now, there are about 1,600 parcels available, roughly four times the number we have put up for auction in previous years. The majority – 1,231 – are timeshares, many with minimum bids as low as $900.
The remaining 393 parcels are improved and unimproved properties, 39 of which have owners living in them. Owners of the for-sale properties can redeem them by paying owed taxes and fees until 5 p.m. on May 4. Over the past five years, TTC notices and late bills to these owners have not been responded to. In early April, each of the properties will be personally contacted by TTC staff who will warn them of the impending sale.
The TTC has not held a tax sale auction since 2015, and on average, sales have generated more than $1.1 million each year.
We are in the business of selling thousands of homes every year (last year in San Diego County we sold 23,962 homes worth $17,168,811,888).
Wouldn’t you think that there would be a set of rules to guide us? There isn’t, and what’s worse is that you don’t know what to expect on each house for sale:
Will the listing agent create a bidding war?
Will the listing agent take the first offer?
Will they do their advertised open houses, or not?
Will the listing agent tilt the table, and take his own buyer’s offer?
Each sale is different, and there is no telling what will happen. The uncertainty creates an environment where qualified buyers are denied the ability to compete, and the chaos helps to fuel the buyer frustration, which keeps the frenzy going.
Think if we had a marketplace where you knew that every home was going to be sold the same way. Pick any process – it would bring a logical, business sense to the market if everyone played by the same rules!
I believe that the auction format is the process that is the fairest, but there isn’t a consensus among the big industry players to change anything about the current environment. Will it ever improve?
This week I submitted an offer on behalf of a buyer, and the listing agent reported that he had multiple offers. I asked:
“Are you the kind of agent who discloses the other offers?” and included this video from last week:
He said he would need to ask someone, and then wondered, “Are you one of those agents who would”? I said, “Absolutely, it’s in everyone’s best interest – agents, buyers, and especially sellers.”
Twenty minutes later, he tells me the price and details about the offers on the table, and the price of a previous escrow that didn’t work out – it was the highest of the bunch. He also said that he expected more offers, and that they will just take the best one.
He also added, “You were the only one to ask for more info, so there you go 🙂 Good job working for your clients.”
The industry will be reluctant to adopt the auction format, but maybe we can take baby steps and get there eventually.
Guess the sales price of Matt Kemp’s house being auctioned April 20th with no reserve! He paid $9,075,000 in 2013, and it has been listed for $11,500,000.
The person with the closest guess will receive 4 tickets to a Padres game!
“[The auction] is going to be a better route for bringing legitimate interest to the property,” said Nartey, the director of sports entertainment division at Compass. “It’s an opportunity for someone to get an asset for less than its actually worth.”
The “asset” in question includes a 15,884-square-foot main house, a tennis court and an infinity-edge swimming pool on about 4 acres of grounds. A separate pool/guest house holds a gym and a roman spa.
Features of the home, which Kemp has spent about $3 million to update, include custom travertine floors, a cigar lounge with a humidor and a 1,200-bottle wine cellar with a tasting room. A custom home theater is outfitted with tiered seating and a snack bar.
Perception is more important than the reality….if buyers read this stuff and decide to wait-and-see, then we could have a problem. But every day we are inundated with breaking news – this story will be forgotten by tomorrow.
There aren’t any 2-for-1 deals or rebates yet, but high-end home sellers across the country are offering discounts as the luxury market softens. “Buyers are very price sensitive,” says Donna Olshan, a Manhattan-based real-estate agent who publishes a weekly report on the luxury market. “If it’s not priced right it’s going to sit until the cows come home.”
“We’ve priced to account for today’s market,” says developer Gary Barnett. “The market wants to see some discounting.”
In cities like New York and Miami, where an unprecedented luxury building boom over the past five years created an abundance of lavish condominiums and speculative homes, the market is in the midst of a full-on slowdown.
“The smart sellers today are pricing for now, not 2014,” says Jeff Adler, of New York’s Douglas Elliman.
In other regions, like Southern California, agents say the market is still hot but there’s concern about a potential supply glut on the horizon.
The strength of the U.S. dollar has also turned away some overseas buyers, which had been a large part of the market for high-end condos in Miami and in some new developments in Manhattan.
In San Francisco, where a tech boom and housing shortage have fueled a real-estate gold rush, the peak of the market was summer 2015, says Alan Mark, president of the Mark Co., which does marketing and sales for new developments. New-condo prices are down 3% compared with a year ago, and a few developers are offering incentives like higher commissions for brokers or free upgrades for buyers. But prices, he says, will likely hold steady since overall supply is still low. There are about 700 new condo units under construction that will hit the market this year—well below the peak of new construction in 2007, when 3,000 new units hit the market.
Stephen Shapiro, CEO of Westside Estate Agency in Beverly Hills, says the market for homes priced higher than $25 million is particularly strong in the L.A. area. And the ultraluxury spec-home building spree shows no signs of slowing. A couple of new properties will test the strength of the market, including a newly built home asking $250 million that hit the market last month—now the most expensive listing in the U.S. Though many real-estate agents doubt the home will sell for anything close to its asking price, even a sale at a 50% discount would still set a record in California.
Mr. Shapiro says that over the next three to six months, a number of fully furnished spec homes in the Trousdale Estates area are slated to hit the market, all priced in the $20-million-plus range. “They’re all building the same house,” he says, which may result in some discounting. “So maybe developers will make $5 million profit on a home instead of $10 million.”
Sasha Galbraith, who runs a strategy and organizational design consulting firm, has two properties on the market in Colorado—a condominium at the Four Seasons in Denver and a contemporary ski home in Breckenridge—that she thought were priced to sell at $1.8 million and $4.75 million, respectively. The Denver property went on the market in October, and the Breckenridge property has been on the market for 16 months.
Tired of tidying up the properties for showings and ready to move on financially, Ms. Galbraith decided to auction both properties with New York-based Concierge Auctions. There will be no reserve, or minimum, price set. “It’s a risky process, there’s no question,” says Ms. Galbraith, who is 57. On Feb. 27, the auction date, “either I’ll be needing a box of Kleenex or popping a bottle of Champagne.”
I just watched your first attempt at the auction and must say that you did a fine job as the auctioneer. I have been a real estate auctioneer/realtor for 30+ years and have often recommended an auction to fellow realtors in high demand situations such as yours. Of course, it usually falls on deaf ears as the realtors usually feel that they don’t need the service nor do they want to share the fee.
I hope you don’t mind the questions but I have been trying to work with realtors for many years and it seems to be a constant struggle.
I’m curious about what made you suddenly decide to utilize an auction when you could have easily achieved more than the asking price without it?
JtR: Because there were multiple people at the open house that said they would be interested in purchasing the house, I thought this would be the best way to determine the winner fairly, and create maximum urgency. The agents involved were willing, and so was the seller, so it worked out. We did close escrow with the winning bidder at the price determined by the open bidding.
What was the seller’s opinion when you told them you were having an auction?
JtR: She was motivated to sell, so that made the difference. Sellers who aren’t that motivated are suspicious of selling too quickly, thinking that this is like most jobs in the world where you work hard for weeks or months to achieve the desired result at the end.
But selling real estate in this low-supply, high-demand environment is the exact opposite – you stand the best chance of selling for top dollar in the beginning when the property is a hot new offering, and has max urgency. Buyers think something must be wrong with houses that aren’t selling in a hot market.
Did you consider actually marketing the property as an auction for a longer period of time and possible having more bidders?
JtR: No, because the highly-motivated buyers are there first. There could have been other people interested later, but if they aren’t interested enough to come to the open house, then they probably weren’t willing to pay 4% or more over list price. Yes, there could always be two in the bush, but our environment has trained buyers to race to hot new listings that might be a perfect match for them. Not only will they be the most likely to pay more than others, but they are more likely to close escrow too.
I consider the quality/suitability of the property too. This was a 1,541sf two-story house with a steep slope behind, so it wasn’t for everyone. There were 3x as many people who didn’t bid. Sellers and listing agents should consider how many people who came and didn’t offer.
Will you consider using the auction method in the future?
JtR: Absolutely, it is the best way to achieve top-dollar sales. The animal spirits are driven when competing with your opponent eye-to-eye.
But auctions aren’t commonplace yet, so when I have multiple offers on a listing, I create a similar experience by pitting bidders against each other to increase the price. I tell them the price to beat, which nobody does. Realtors want you to think it is better to bid blindly, but buyers are much more likely to go higher if they have a number to beat. I take advantage of the competitive spirit, which you don’t have with blind bids.
For those who might think an auction format would only work for lower-priced properties, let’s note that there have been three sales in Rancho Santa Fe that utilized the no-reserve auction process, and closed for more than $10,000,000.
Those three are the ONLY sales over $10 millionin the last five years in the Ranch, and there are 30 for sale today. Let’s give auctions a try!
Of course, I would be happy to answer any questions that you may have.
Thanks, David
JtR: David, if a trusted name-brand company brought a slick and easy auction process to home sales and advertised it properly, do you think they could succeed? Do you think they could change everything, and potentially eliminate realtors as we know them today?
He was met with the usual drivel from agents, some of whom mentioned the big difference between a real estate licensee and a Realtor is that we subscribe to a strict Code of Ethics.
But if we’re going to re-brand the name Realtor, then let’s stop the charade about ethics. Realtors have stood by idly while their fellow agents have fleeced the banking industry with fraudulent short sales. We intentionally deceive consumers by re-inputting our listings to make them appear like hot new offerings. We make off-market deals and boast about them in the MLS that they were ‘sold before processing’, when every realtor has signed an agreement to share their listings with each other.
None of that is ethical, and if you participate – or stand by and watch others participate and do nothing about it – then you’re not an ethical agent.
Let’s put an end to it.
Either be ethical, or let’s stop saying we’re ethical, when we’re not.
Because the industry is so fragmented and independent, we’re not going to get a million agents to be ethical when you can double your commission by telling sweet little lies.
But we could educate sellers on the truth, and save our jobs.
The auction format would help to drain the murky cesspool of home selling. Buyers and sellers would enjoy full transparency, and everyone would have a shot at paying what they think a property is worth.
Auctions would invigorate the marketplace!
But sellers are leery of the idea, and they don’t want to give it away.
Here’s my idea:
The MLS is a dinosaur, and has been complicit in the fraud. Instead, let’s take this idea straight to Zillow – they already have different categories of listings on their website: Pre-foreclosures, Coming Soons, Make Me Move, etc.
Let’s add a new category: Market-Rate Sellers.
First, we properly educate a seller by having them read and understand the definition of a property’s value. We give them this disclosure:
A property’s value is defined by how much a ready, willing, and able buyer will pay for it. After proper marketing, I am willing to sell my property for what the market will bear. Signed, Seller.
Why don’t we already have this piece of education? Because sellers think they determine the value, and agents do nothing to convince them otherwise. Instead, we encourage the idea just to get the listing. Is that ethical?
If a seller is stuck on his price, then they go into the Make Me Move category. No problem, I take listings like that – and I might get lucky some day.
But for the sellers who want to control the entire process and move promptly, we will have a solid game plan to get them top dollar now:
The Slow-Motion Auction:
Tune-up house.
Open house for 5-10 days.
Buyers engage in open bidding at the house on X date.
Sellers and buyers deserve to have this full transparency, and the ethics it would impose on agents will save our jobs.
In the beginning of this video I said $20 million but that was the previous list price. It just closed for $10,650,000, which is line with the initial quote of double-digit interest. It is worth it if you need a sprawling Covenant ranch!
This is the highest 92067 sale since the last auction in March, 2015!
When it comes down to the last 2% to 4% on price negotiation, why is there so much trouble putting a deal together?
It because the participants had no strategy going in – they just start making offers or counter-offers without regard to where it will lead.
Without a specific strategy, it’s too easy for either party to throw their hands up and say, “I don’t know how I got here, and I don’t like it!”.
This is another reason why we should adopt the auction format to home-selling. The auctioneer has a very specific strategy on price, and the increments of change – all the buyers have to do is say yes or no.
Until the auction format takes over, what can we do?
My ideas on offer/counter-offer strategy:
Keep It Simple – Negotiate in 25-50-75-99 increments, they are easier for the receiver to compute the differences. It also helps to give the other party a strategy for their response – if they are paying attention.
More Simple – If you can’t get on a 25-50-75-99 track, then sellers’ counter-prices end with a nine ($879,000), and buyers end with a zero ($850,000 or $860,000).
Buyers – Have your initial offer reflect the days on market. If you offer 5% under the list price on a house that has been listed for 3 days, you won’t get a response. Make the same offer 3 months later and the seller should be happy to engage.
Velocity – Make a big price move with your first counter-offer to encourage the other party (heck, they might be so happy they just sign it), but then pull back on the second round.
Don’t Go Longer Than Two Rounds of Counters – Parties get tired of playing, and burnout sets in quickly.
Expect to Split the Difference at Some Point – it’s a win-win solution.
Know the Other Agent’s Level of Competence – If the other agent sells less than one house per month, they are likely to willy-nilly the process. Your agent needs to help them along.
If you are the buyer, it would be nice to pick up some signs along the way to assist with setting a price strategy, and lay out your expectations mentally.
Signs of seller motivations, and what a buyer can expect:
How difficult it is to see the home. If the listing agent blows you off for a day or two, or wants to show the house at their convenience, not yours – then you can expect tough sledding ahead.
How quickly they responds to your offer/counter. If the sellers doesn’t respond within 24 hours, it means they don’t understand buyer’s remorse – and don’t care.
How close they stick to list price. The closer they stick, the more (over)confident they are.
Who the seller picked for a listing agent will tell you just about everything you need to know about your chances of success. If they select a reputable, experienced agent, then you will know because the house looks sharp, it’s easy to see, and the price is attractive. If they picked a loser, then the photos are terrible, the house looks like crap, it’s hard to see, and the price is 10% higher than comps, or on a goofy range.
Remember that it takes four things to make a deal – the right house, the right list price, the right seller, and the right listing agent. If any of those four are out of whack, then a deal is unlikely.
As you can see in the video, the house was all original from 1941. There was a deliberate attempt by the trustee and agent to price-in the condition, and select a list price towards the bottom of the range.
This is the type of neighborhood that can vary block to block, depending on upgrades – so you’d like to have comps within a block or two, ideally. The most recent comp on the block was the $685,000 for a 4br/2ba, 2,114sf house across the street that closed in April, 2015:
(the $707,000 is a pre-foreclosure)
There were others further away in the $600,000s, so starting with an attractive list price of $624,999 made sense (the subject property is green dot on map).
The half-hour open house took place on a Sunday, and bidders had until Wednesday to submit their offer.
18 offers were received, and six were all-cash!
The cash offers were asked for their highest and best, and not one but TWO offers of $730,000 were submitted – one was from the next-door neighbor! But his agent struggled with the paperwork, and there was some mis-direction too. But the other buyer had made the best initial offer of $725,500, and had upped it to $730,000 just to add a little extra mustard.
With the identical cash offers and both with short escrow periods, it came down to the agent – who best had their act together. The neighbor didn’t get it – which could lead to some frosty conversation over the hedge!
Seven days later, the escrow closed at $730,000 as-is (no repairs requested).
It shows the power of the auction format, and how turning the sales process into a competition gets buyers fired up about winning – usually at all costs!
Two cash buyers were willing to pay more than $100,000 over list!
The good things that happened to assist:
There was one comp at $740,000.
It must have been a fair competition.
Prices are going up so fast in these older but quality neighborhoods that it feels like a runaway train to buyers, and they are desperate to grab anything.
But more than anything, it shows that with a good agent and a proper bidding process, it makes sense to put an attractive price on it. If they would have listed for $729,000, they would still be sitting there!
