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Baby, we got a bubble!?

If you were the seller, why would you restrict yourself?

I don't approve of how things happen and this article shows how deplorable it is but if I was the seller and someone wanted to come in with a better late bid, why would I not wish to deal with it?

That said, I think the article indicates the need for proper transparent rules for how a bid/auction should occur. Holding off for a week to allow people to see the property and decide if they want to bid makes sense to me. However, to balance, one should know how many people one is bidding against. Further, if it becomes apparent that there were phantom bids, the person not only should be compensated but the realtor and the seller fined for fraud in my view.

Anyhow, this may be too little too late until the next real estate cycle because other than very desirable properties, I am quite sure that bidding wars are rapidly disappearing.
 
If you were the seller, why would you restrict yourself?

I don't approve of how things happen and this article shows how deplorable it is but if I was the seller and someone wanted to come in with a better late bid, why would I not wish to deal with it?

That said, I think the article indicates the need for proper transparent rules for how a bid/auction should occur. Holding off for a week to allow people to see the property and decide if they want to bid makes sense to me. However, to balance, one should know how many people one is bidding against. Further, if it becomes apparent that there were phantom bids, the person not only should be compensated but the realtor and the seller fined for fraud in my view.

Anyhow, this may be too little too late until the next real estate cycle because other than very desirable properties, I am quite sure that bidding wars are rapidly disappearing.

I agree. But what I don't understand is why agents are encouraging people to put in their best bid, because their bid may be thrown out and they won't get a chance to bid again. If I was the seller, I would update all bidders what the latest bid is, and encourage ANY of the past bidders to beat the price. Why would I disallow someone to bid again?

At the same time, transparency in the bidding process should be legislated. The situation described in the article above of phantom bidders can be mostly avoided if its like an auction house, where all the bidders can see who bid what, and can re-enter the process at any time. A barrier of entry of a cash or cash equivalent submission to "pre-qualify" the bidders might also help (perhaps a bank draft of $20,000 to bid, refundable if the bidder is not the winner. This will also allow for a paper trail in case some of the bidders are "rigged" (i.e. the seller hired someone to bid up the price, with no intention of buying).
 
Oh please spare me Josie.

She messed up, and messed up big and she's trying to cover her you-know-what before the clients realize that she didn't do her job properly. Bid based on worth, personal finances and price tolerance, not how many other people are in the auction. Even then, she let her clients bid 75 grand over without confirming how many bidders there were? That's what's negligent, not the rules.

If phantom bidding is truly a problem - in this case, it's possible it is but it is also realtor negligence, sorry Josie - I could see a registry of the agents/brokerages that submitted bids could help track down fake bids. But otherwise there really isn't anything to fix...it is just the market at work, unfortunately. Too much transparency could really screw buyers and end up costing them more.

She is extremely successful and therefore well known in certain parts of the city, and part of that is her role of returning over-list sale prices through under-pricing, multiple offers and bidding wars. Check out her website, with a comprehensive listing of sold properties and notice the paucity of houses at or below list. Some more 100 grand over. And that's a truncated list from what used to be up there.
 
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Oh please spare me Josie.

She messed up, and messed up big and she's trying to cover her you-know-what before the clients realize that she didn't do her job properly. Bid based on worth, personal finances and price tolerance, not how many other people are in the auction. Even then, she let her clients bid 75 grand over without confirming how many bidders there were? That's what's negligent, not the rules.

If phantom bidding is truly a problem - in this case, it's possible it is but it is also realtor negligence, sorry Josie - I could see a registry of the agents/brokerages that submitted bids could help track down fake bids. But otherwise there really isn't anything to fix...it is just the market at work, unfortunately. Too much transparency could really screw buyers and end up costing them more.


She is extremely successful and therefore well known in certain parts of the city, and part of that is her role of returning over-list sale prices through under-pricing, multiple offers and bidding wars. Check out her website, with a comprehensive listing of sold properties and notice the paucity of houses at or below list. Some more 100 grand over. And that's a truncated list from what used to be up there.

I can't comment on whether the realtor "screwed up". However, the issue of how the auctions are run I think is a problem. This is not the market at work in my view. In any business or in a law suit, usually the first thing you see is "full disclosure". If this does not occur, then the whole deal may be put into question.

I do not agree with your conclusion that too much transparancy may screw buyers or sellers for that matter.
I believe that we would agree that the price paid should be fair market value. Whether that is more than the buyer wants to pay or less than the seller wishes to receive I do not believe is the issue. Why should a distorted opaque bidding system which has no transperancy work to either further the benefit for the buyer or the seller? It should be open, comprehensible and both the buyer and the seller would get "the fair market value", i.e., what an informed buyer is willing to bid and what an informed seller should be expecting to receive. As it is, there are some unjust rewards occurring with either buyers overpaying and possibly sellers not receiving what they might in an open transparent process.
 
Why is the original agreed-upon price from the article (the one with a 75 grand above-list bid) not "fair market value"? I'll give you credit, at least you put it in quotations unlike many others. The sellers were willing to pay that much, I guess they felt it was affordable, they obviously felt the house was worth that much, so I don't see why they should cry to The Star. It's a whopping 7.5 percent over list. (Much much much lower than the average over-list Josie gets on most of her sales, I might add.) And in the end, they settled on a big that was ~4 percent over bid. Not huge margins here to cry about overpaying.

There are implications to full disclosure. Like privacy, and competition - if we're both buyers and bids are disclosed you'll end up knowing how much I can afford. Why should that be information you are privy to? How will that affect the next round of houses we bid on - how will that impact how they are priced, and how you might bid? If you and I are competitors in a very competitive, supply-limited marketplace of like-products that is often local and sub-local in nature - this could have significant implications.

And what about overall pricing and market implications? Do we know how this will affect prices? How well has Australia's auction system worked for people who have purchased houses lately? Aren't they the most over-valued market in the list of bubbling property markets? What role has open auctions (which aren't mandatory, even there) played in that market?

Sure, a completely open auction process is going to result in some houses going lower than they would have, like this one, but it's going to end up in many going higher as knowledge of bids will result in a tit-for-tat of price matching + 1 to the highest threshold value that someone is willing to bear. "Fair market value"? Maybe, but again, disadvantage to the buyer and not much of a help to our bubble, assuming it exists.

One of the benefits of the current system is that it requires buyers to pick a price they are comfortable with and feel they can afford and quit once that threshold's been passed. There is value in that. If people do that incorrectly, they only have themselves and possibly their realtors, to an extent, to blame. If people can't keep a handle on bidding according to their means and assessments of "fair market value" in this system, how well are they going to do that in an open auction where it's easy peasy to just bid over the last guy by 1500 bucks in the heat of the moment?

If Josie's clients only wanted to spend 1.045 million instead of 1.075 million then that's what they should have bid.

Don't get me wrong, the current system has definite gaps but the question to ask is, what is the problem? Transparency isn't the problem, it is a solution, but a solution to what? I don't have a problem with an open auction system but we need to consider the long-term implications and make sure we're okay with them first. And if buyers think that transparency is going to protect them from "overpaying" and keep prices down and stop nasty bidding wars (an auction is a bidding war) then boy they will be in for a shock.
 
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Why is the original agreed-upon price from the article (the one with a 75 grand above-list bid) not "fair market value"? I'll give you credit, at least you put it in quotations unlike many others. The sellers were willing to pay that much, I guess they felt it was affordable, they obviously felt the house was worth that much, so I don't see why they should cry to The Star. It's a whopping 7.5 percent over list. (Much much much lower than the average over-list Josie gets on most of her sales, I might add.) And in the end, they settled on a big that was ~4 percent over bid. Not huge margins here to cry about overpaying.

There are implications to full disclosure. Like privacy, and competition - if we're both buyers and bids are disclosed you'll end up knowing how much I can afford. Why should that be information you are privy to? How will that affect the next round of houses we bid on - how will that impact how they are priced, and how you might bid? If you and I are competitors in a very competitive, supply-limited marketplace of like-products that is often local and sub-local in nature - this could have significant implications.


And what about overall pricing and market implications? Do we know how this will affect prices? How well has Australia's auction system worked for people who have purchased houses lately? Aren't they the most over-valued market in the list of bubbling property markets? What role has open auctions (which aren't mandatory, even there) played in that market?

Sure, a completely open auction process is going to result in some houses going lower than they would have, like this one, but it's going to end up in many going higher as knowledge of bids will result in a tit-for-tat of price matching + 1 to the highest threshold value that someone is willing to bear. Fair market value? Fine, but again, disadvantage to the buyer and not much of a help to our bubble, assuming it exists.

One of the benefits of the current system is that it requires buyers to pick a price they are comfortable with and feel they can afford. There is value in that. If people do that incorrectly, they only have themselves and possibly their realtors, to an extent, to blame.

If Josie's clients only wanted to spend 1.045 million instead of 1.075 million then that's what they should have bid.

Don't get me wrong, it's not perfect but the question to ask is, what is the problem? Transparency isn't the problem, it is a solution, but a solution to what? I don't necessarily have a problem with an open auction system but we need to consider the long-term implications and if buyers think that transparency is going to protect them and keep prices down then boy they will be in for a shock.

I appreciate your points Jeff. That said, I fail to see to making informed decisions is anything but correct. In this case, rightly or wrongly, the buyers made a bid not necessarily what they thought it was worth or maybe even not what they were comfortable with. Rather, I believe they made a calculated bid on the misinformation that there were 3 competing bids and hence if they were to get it, they would have to pay beyond the asking price. It is not that I have a problem that they pay beyond the ask, or that that may in fact be fair value. I would rather suggest however that the bid was made due to a perpetrated fraud on these people. They bid believing there were 3 other bids which was not the case. I would argue that the seller was unduly enriched and the buyer overpaid beyond market.

Please understand, I agree they only have themselves to blame. That said, it is still patently unfair to "dupe" people by giving them misinformation. All any of us can hope to do is use the best information available and come up with a reasonable conclusion.

People can't be saved from their own stupidity unfortunately. You are correct that people get carried away in open auctions and may well have buyer's remorse. The intelligent thing to do is to figure out what price you want to spend and bid that and go onto the next house if you don't get it at the price you the buyer feel it is worth. The seller should intelligently look and decide if he has received a price he/she feels is fair and decide if to sell. However, again to emphasize, both should do this with the benefit of factual, not fraudulent information.
 
And I think that's a fair post. I don't disagree with that in any way. My main disagreement is that in the open auctions the chance for misinformation or fraud is slightly more difficult but far from impossible so we better know what we're getting into aside from that aspect.

I think it all comes out in the details, what info would be available and who has access, etc. There are numerous potential iterations. My main gripe is that auctions are seen as solution to the "problem" whether it is phantom bidding, or bidding wars, or "overpaying" or "underpricing" or the bubble or whathave you and aisde from the fact that the "problem" is different to each buyer/seller, they are far from it. We need to know what we're dealing with and unlike you most people haven't thought it through.

In the RFP bid-based processes that I've run, to the best of my knowledge none of the participants ever knew what the other bid. We certainly never told the others - that would have been private commercial information. We didn't go to firm A to tell them that the other competitiors bid x% lower - they would have known who those bidders were. And I'm certainly not allowed to pass that info on in any official capacity to my colleagues. I can see why releasing that could have implications in the next bid. And considering real estate agents are dual agents - they can represent sellers and buyers - spreading the info of how much who was willing to pay for what, when and where...that's a lot of personal, private "commercial" info out in the open to change how bids are made or houses priced. But now I'm just repeating myself. Apologies.
 
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According to the lastest TREB Market Watch, Toronto Condo sales were down 26% in June 2012 (857 units) versus June 2011 but active listings are up 36% at the end of June 2012 (3,191 units) versus the end of June 2011. Average selling prices of Condos are up 2.7% in June 2012 (Ave $424,875) versus June 2011. A detailed release will be published on the TREB website this afternoon.
 
I think we are of like minds.

I don't think that the auctions need to be open bid. I think a closed bidding process is OK but I think the circumstances need to be clear. Am I bidding against 3 people or not. Certainly, even if you think that as a buyer I should not know this, and I may in fact agree, I should not be told a deliberate falsehood. That is just wrong.

Since the market is slowing anyhow, I think for the next while the discussion will be somewhat academic. But something needs to be tweeked before the next "bull" market in real estate.
 
According to the lastest TREB Market Watch, Toronto Condo sales were down 26% in June 2012 (857 units) versus June 2011 but active listings are up 36% at the end of June 2012 (3,191 units) versus the end of June 2011. Average selling prices of Condos are up 2.7% in June 2012 (Ave $424,875) versus June 2011. A detailed release will be published on the TREB website this afternoon.


This seems to be in keeping with what I am hearing from realtors whom I know well and willing to tell me "the real" story.

I am sure the spin from TREB will be: A more balanced market. The problem is if condo sales were up instead of down 26% the spin would be "sizzling market".
 
This seems to be in keeping with what I am hearing from realtors whom I know well and willing to tell me "the real" story.

I am sure the spin from TREB will be: A more balanced market. The problem is if condo sales were up instead of down 26% the spin would be "sizzling market".

Yes. The spin from the house-pushers will be quite hilarious in the coming weeks and months. But it's quite clear that the even the government is convinced that Toronto is a bubble spinning out of control. Flaherty won't say that, because he doesn't want to set off a panic. But he knows that's what is going on, and that's why he's doing everything he can to pop the bubble without creating a panic.
 
That still doesn't answer my question as to why sellers aren't allowing people with "low" bids to re-bid. I think that both the seller and buyer agents are perpetrating the mantra "bid high or go home" way too far. Yes, you can have a closed bid system. But I don't see why past bidders, despite how low they bid previously, shouldn't be allowed to re-enter the system.

It takes minimum work on the seller's agent and the buyer's agent to allow for more bids. Why exclude a potential buyer? Lets say the house is listed for $1,000,000. Buyer A bids $900,000, Buyer B bids $990,000. Buyer C bids $995,000. Why does the selling agent tell Buyer A to go home? Just because Buyer A had a much lower bid doesn't mean they aren't capable of bidding $1,000,000 next.

Conversely, using the same house as an example, Buyer A agent tells their client that the market is hot, and you won't win unless you bid everything you got. Buyer A listens, and bids $1,000,000. This time, no other bidders are present, and they win. But unknown to Buyer A, the seller would have accepted $950,000. Buyer A's agent provided poor advice. But this seems to be the standard advice given nowadays to buyers. How would you know the price of acceptance before even testing it out? If they went with their original bid of $900,000, the seller's agent, if they are acting on the behalf of the sellers properly, would bring the seller the offer, and they will say no, offer more. They shouldn't exclude anybody just because of a low bid. The bidder can always offer more.

Sorry, I ranted a little. Its something that I could never understand, and no agent has been able to make me understand. I always felt they had a motive - either a quick buy/sell, or less work on their end to coordinate bids.
 
That still doesn't answer my question as to why sellers aren't allowing people with "low" bids to re-bid. I think that both the seller and buyer agents are perpetrating the mantra "bid high or go home" way too far. Yes, you can have a closed bid system. But I don't see why past bidders, despite how low they bid previously, shouldn't be allowed to re-enter the system.

It takes minimum work on the seller's agent and the buyer's agent to allow for more bids. Why exclude a potential buyer? Lets say the house is listed for $1,000,000. Buyer A bids $900,000, Buyer B bids $990,000. Buyer C bids $995,000. Why does the selling agent tell Buyer A to go home? Just because Buyer A had a much lower bid doesn't mean they aren't capable of bidding $1,000,000 next.

Conversely, using the same house as an example, Buyer A agent tells their client that the market is hot, and you won't win unless you bid everything you got. Buyer A listens, and bids $1,000,000. This time, no other bidders are present, and they win. But unknown to Buyer A, the seller would have accepted $950,000. Buyer A's agent provided poor advice. But this seems to be the standard advice given nowadays to buyers. How would you know the price of acceptance before even testing it out? If they went with their original bid of $900,000, the seller's agent, if they are acting on the behalf of the sellers properly, would bring the seller the offer, and they will say no, offer more. They shouldn't exclude anybody just because of a low bid. The bidder can always offer more.

Sorry, I ranted a little. Its something that I could never understand, and no agent has been able to make me understand. I always felt they had a motive - either a quick buy/sell, or less work on their end to coordinate bids.

I can comment on this personally.

I had a property a few years ago which we put on the market when the market was soft (early 2009). We priced it at the lowest price (within $10K) that I would accept. I received 4 offers; 1 about $110K below ask, one $55K below ask, one $40K below ask with minimal conditions, and one $10K below ask. I told the agent to ask everyone for their best offer and that I would make a decision. It turned out the one $40K below ask came to $10K below ask subject to financing and house inspection, the 10 below ask offered full...NO CONDITIONS. I would have taken the $10K less if their offer would have been clean and the $10K not, by the way. If they would have had no conditions but given that the house was 35 years old I did not know what might potentially be unwittingly discovered on an inspection. Let me say I knew of no major problems. A couple of minor issues (less than $1K) was all that I knew.

So, the lowballer at $110K was just that. The $50K below was unwilling to rebid. I was happy to get the offer I did....incidentally just as the market was turning in 2009. Had I waited, I would have had much more but you can't always get every decision right. I still think that I may yet see close to the 2009 price I sold that for revisited but I guess time will tell.

Since the 2 rebid I told them both that I would decide within 2 hours of receipt of both their bids and would accept one or the other. Again a different market but I as the seller wanted the deal done. I am sorry for the couple who did not get the house however they were foolish since they knew we were getting the additional bid and rather than up it, decided to go to the bidding war....I guess thinking that we were making up "phantom buyers"....I don't know. I did hear they had not bought 6 months later and prices were up about 6% by then beyond what I received....
 
I think it has more to do with the psychology of bidding. If I as a seller only had one bid, and it was a lowball bid, I'd counter with a high counter, and let them respond.

However, if I as a seller had four bids, with a couple of decent bids, with the two other two being outrageously low vs fair value, I'd just drop the bottom one or two. You should be aware that generally in such a situation, the agents involved have a reasonable idea of what is outrageously low for the seller and what is within reason. Dropping the uber low ball bids is just their way of saying FU, go away and stop wasting everyone's time, and it discourages low-ball bidding.

Personally, I have no problems making a low bid in a single offer situation. All of our low bids so far have been <10% lower than asking IIRC, but interestingly, all have been accepted at those offers, or close. In the future maybe I'll make more true low ball bids at 10-15% off, when in such a single-offer situation. ;) Some claim that in a single offer situation, if your offer is accepted the first time around, you've paid too much. :p
 
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