For a while, I went to auctions. Art, natural history (fossils, etc.), wine. If you haven’t been to a live auction, you should—it’s fun. 

 

There’s real energy in the room. You can’t get in without signing up and getting a paddle, so even if you’re not there to bid, you feel like part of the action.

 

The wine auctions are especially fun. They open and pour 50-year-old $1,000 bottles for free which you drink at communal tables, like a giant dinner party. 

 

What I love about auctions is that everything up for bid is unique.

 

Like, how cool is it that someone bought the piano from Casablanca? Final bid? $2.9 million.

Why are unique things sold at auction? Because there’s no way to know what they are worth. There’s only one Casablanca piano; you can’t price it based on what other pianos have sold for.

 

So they start at a low number and get bid up and up until they reach the highest number possible.

 

Then, they give everyone one final chance. Going once…going twice…sold!

 

Once in a while, you see someone try to sell a house at auction. That silly giant house “The One” couldn’t sell at $500 million, so they finally unloaded it for $126 million at auction to the owner of Fashion Nova. Conducted on the front lawn. It was a fixer and didn’t have a Certificate of Occupancy, and still doesn’t. (I checked).

In Australia, houses are sold via live auction in the front yard. Even they think it’s weird. 

 

But the truth is, half of all real estate sales here in Los Angeles are sold by de facto auction, colloquially known as “bidding wars.” We can’t call them auctions (you need an auctioneer’s license), but they are auctions. 

 

Buyers even call offers “bids.” “We bid on a house,” they’ll say.

 

And they are right. In a multiple-offer situation (which these days happens with any remotely well-priced home with just a smidge of character), you’re in an auction.

 

The agent collects offers, then counters everyone, asking for a “best and final” offer. There might be a bottom “no lower than $2.2 million,” and invite home buyers (bidders) to come in at their max max.

 

Then everyone goes in again.

 

In a well-run “bidding war,” the agent will give you an indication of where the offers landed after the first round (traditional auction style) and an idea of where the final number will end up.

 

Other times, buyers are bidding blind more akin to guessing how many gum balls are in a jar. Even though agents are legally allowed tell you what the other offers are, most of the time, they are silent. Honestly, this is a disservice to their sellers. Buyers will offer more with guidance, as it mitigates their very deep fear of overpaying.

 

As a buyer, there are two instances in which you are not in an auction and are, therefore, less likely to be paying top dollar.

 

Number one, being the only offer. Then it’s a traditional negotiation, you vs. the seller. That’s half of all sales in LA.

 

Number two, when it’s a multiple offer situation, but the seller just accepts the first offer, or the highest offer on round one. 

 

That’s just bad agenting. Year after year, this is the most costly real estate mistake I see—the listing agent doesn’t collect and/or counter other offers and never finds out what the highest price could have been. 

 

I always feel sorry for the seller in these cases. After the property closes, everyone can see the sold price, and all the losing buyers go, “Wait, that’s what it sold for? I would have paid more.”

 

As a seller, if that happened to you, you would never know you left money on the table and that your agent screwed up.

 

You must give buyers a chance to pay the most with a “best and final” counter. Frankly, it's what buyers have come to expect in LA.

 

Everyone wins with an auction.

 

Sellers make more money. Remember the real reason valuable things are sold at auction: if it’s properly managed, buyers will pay more than they would have if you had just priced at market.

 

And for buyers, the winning buyers are thrilled - they won(!), and their love of the home is confirmed by scores of other buyers who loved it too.

 

The losing buyers are also relieved when they see the final sales price at close and go, “Whoa, are you kidding? They paid what? At that price, they can have it.”

 

The key to a bidding war is to start low. There's never a “market price” for a home because remember, each house is unique. But there is an estimated range of value based on past comparable sales. To get a bidding war, start at the low end. 

 

Christie’s is damn sure that Van Gogh will sell for $200 million, but they don’t start there. They start at $20 million. You want momentum.

It doesn’t work in reverse, which is why sellers should avoid overpricing at all costs. You can’t start high and just go down until someone raises their paddle. That’s called a “Dutch auction.” You haven’t heard of them because no one does it that way because it doesn’t result in the highest price.

In the kind of market we are in now (a very busy one), you need to price low (price low, sell high).

 

Homes are unique and you can never be sure what yours is worth. You want an auction. Right now, it’s impossible to underprice anything - let the market bid it up.

It’s insane out there. We just got 32 offers on a house. Feels like the early COVID days again. 

       -Brock

 

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