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Blind bidding in the Bay Area
By grinderman Follow Mon, 30 Jan 2012, 8:35pm 6,789 views 55 comments
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Lafayette, CA
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edvard2 says
This isn't what he's saying. Almost all contracts in California are contingent contracts that provide for inspection. He's asking why bids are arbitrarily trusted in the hands of a self-interested realtor who might conjure up an army of ghost bidders if he thinks it will get you to pay more.
The answer is that our market is more "free" than most. Take note those of you who vote tooth and nail to take government out of transactions like this.
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grinderman says
As you Aussies say.. Yes,, there are Dummy Bidding and YES should be made illegal.
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grinderman says
First the state back in 1998-2000 wrongly believed captial gains from rich stock bubble would pay for any future obligations. Which means they ignored the bubble.
Second, after 2000, home prices skyrocketed and like the stock bubble, they self justified thinking it would last for many many years. Never adjusted spending or debt.
Now that the stock and RE bubble have burst, they are still stuck in debt.
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grinderman says
If you wish to live in the most liberal progressive cities in the US, might as well learn the political correct terms..
They are not mentally ill they are called "conditional disorder".
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Obviously, he hasn't been to Kabul.
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Los Angeles, CA
There's a very simple solution to this issue. View Redfin for recent comps. Bid accordingly. If you do not have the accepted bid, so be it.
For the second part... Should the snake oil salesman say something smarmy like "oh that offer won't get it done", your response without hesitation should be to thrust both arms forward, turn palms skyward, extend both middle fingers, and exclaim the words "fuck you'"
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or take 1995-97 prices and factor in inflation ... around 30-40%
to get the real current values based on historical trends..
http://www.housingbubblebust.com/OFHEO/Major/NorCal.html
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Bellingham, WA
grinderman says
Well for one, California only gets 80c of every dollar we send to DC.
California itself cannot print money.
The reason things are so fucked up here is largely due to Prop 13, which was a massive giveaway to the richest landowners in the state, freezing their tax burdens at 1970s levels (+ max 2% pa inflation)
even though their ground rents have quadrupled since then.
Californians were also among the most guilty in raping ourselves in the credit bubble of 2002-2007. 40% of loans made in Salinas were option-arms:
http://www.businessweek.com/magazine/content/06_37/b4000001.htm
and this state is also proud home to the $700,000 loan to a part-time strawberry picker:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/04/15/BUGQ9P8PFL1.DTL&ao=all
If California could cut ties with the rest of the Union, we'd do OK. We've got ag, we've got tourism, we've got entertainment, and we've got tech.
But we only got 2% of the votes in the US Senate, and we're not a battleground state so our Presidential vote is ceremonial.
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Wallingford, PA
Grinderman, you are coming into the American housing market with fresh eyes; the housing situation is worse than you can imagine -- trust your instinct -- there are more than a few vipers in the snake pit. What is the story on earthquake insurance in California these days?
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My previous comment disappeared. Anyway, here are my thoughts. Ultimately you'll have to make the decision.
To me it doesn't make sense to buy anywhere if the plan is to move in a few years anyway. That seems rather obvious. But to delve further into that line of thought, you're also talking of buying immediately in an area you just moved to and know nothing about? Why? I wouldn't move to Sydney and immediately settle on one area and buy something, especially if I knew I was going to move out of the country in a few years. What would be the advantage to buying in a scenario like that? In any case, renting is by American standards a lot cheaper in the Bay Area compared to buying. We've been renting a "charming" 4 bedroom house for less than 1/3rd the cost of buying for the past 8 years now.
Secondly, the housing market is in a slump here. Its been that way since around 2006 and there isn't any signs of improvement. So let's say you buy something anyway. In 5 years you wind up not being able to find a buyer and you're stuck in another country with a house that won't sell in another. Sounds like a nightmare.
Lastly, the Bay Area is pretty diverse in regards to areas and cities, neighborhoods, etc etc. I lived in Berkeley for 3-4 years before I decided I really didn't like it and now really like where I live a lot better. Had I bought a house in Berkeley I'd be stuck with a house in an area I didn't really like. If you must buy a house, why rush? Take your time and really get to see what the area is like.
Good luck.
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edvard2 says
It was on the site and then went away? Yes, I can see Iwog quoted it but I don't see the original comment. No idea how that happened, but it is worrisome.
grinderman says
Yes, that's how realtors like it, so that they can lie about other bids to try to extract more money from you.
All house bids should be public and verified by a bank.
How do things work in UK, Ireland, and Australia? How can you prove the realtor is not lying there?
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G'man,
You act as if the transaction had something to do with you and the seller and a rational market.
It's about maximizing the commission of the broker, fuck-all else. There is nothing and no one in the room with you except that one imperative.
Every detail of these transactions are organized for the benefit of members of a criminal cult that Jeffrey Dahmer would find repulsive.
If you're heading in NZ in five years, don't bother. Enjoy yourself. Rent or squat in one of the war torn neighborhoods of Oakland and watch cannibal anarchy descend. Buy a shot gun and wave it at passersby who appear to menace your home, shoot the ones who threaten you. What could be more of an American experience than that?
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You think blind bidding is crazy. I once went to a new housing action in 2003 where there were 3 houses up for bids. After all the marketing hype in the local papers, fliers, etc. a grand total of 3 couples showed up outside the trailer for the auction. We each put in our preferences and when they realtards went back into the trailer to devise how to scam our asses all the 3 couple chatted. We realized that there was no overlap in our first choices.
Well, when the realtards came back they were dressed in party hats and blowers. They had our names in a hat and then started picking them out. The first draw was hilarious. They hugged and kissed the couple as they blew the horns and celebrated. Then they quickly handed them off to a waiting realtard with the papers drawn up. Then another draw, then the last. Quickly I found myself and wife in the trailer and a pen being pushed towards me. My wife was caught up in the hype and all excited. I started with some questions though. First one was how much commission was built into this sale. Answer: no real answer came back. Next response from me was about why the prices have been adjusted up 5% from the last auction when there was obviously no swarm of people jumping to buy? Well, the realtard then proceeded to tell me I didn't understand real estate.
I took one look at my wife and gave the signal. We marched out. No respect, then no sale. We eventually bought a new house in another division when we were treated properly. The house they pushed on us sat for about a year before it finally sold. The whole sub-division actually never got developed and parks and school the realtards promised are just fields currently.
The real estate industry is like no other. Full of corrupt people with conflicting self interests. Much worse than anything I have ever seen. Blind bids are just part of the scam.
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Los Angeles, CA
OK lets get a moment of sanity here people. The foundation for civilization is property rights, rule of law. You DO NOT have the right to control bidding on someone else's property they are selling!
If I am selling you my used car I DONT have to register with some government agency and have them 'monitor bidding' to make sure its fair and to make sure ALL the bidders know about all the other bidders and that i market my car in minority neighborhoods, etc, have 10 day right of recission, etc. bullshit on and on.
The real estate market in the US is spectacular and I like it the way it is just fine - the messed up part is where the government is involved (bailouts, HARP,HAMP, zero/low down payment FHA, tax credit, tax write off,etc).
The real issue here is not 'greedy sellers' but big government making prices insanely high by giving idiots and/or gamblers 729k loans with borrowed $ from china.
Im surprised that Patrick said this: "All house bids should be public and verified by a bank."
He should have learned the LAST thing this market needs is MORE government meddling. If the feds DID monitor bids you know what they will stick in (more fees/taxes to pay for the priviledge of being monitored thus higher prices) and people who cheat on taxes aka 'the poor' would get priority bidding due to they have fake 'papers'(cheated on tax forms) showing they are under the median income AND if they are minority they will 'WIN' the house with a low bid. haha. nice idea in cuba maybe!
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I think Patrick meant after the bidding, so there is accountability on all sides. It obviously should not be used in the process of selection.
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Buster says
At least in Kabul when you pay mansion prices you get a vast compound/mansion and plenty of budget left for your own army. Here you get a falling apart chicken shack on the wrong side of the tracks.
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iwog says
Except for the all-cash investors and speculators that make offers on places with no contingencies.
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PockyClipsNow says
I do mean exactly that.
There is no free market without a government to protect it. Period.
The free market exists only when price signals are truthful. Without verified bidding on houses, all we have is continuous fraud, no free market at all.
You want free as in "free to commit fraud by lying about other bids". I want free as in "free to buy or not, depending on truthful information".
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PockyClipsNow says
You dont need govt involment regarding blind bidding. Just best practices amoung parties... no more than a 10 point guide printed on a piece of paper which informs parties on how to conduct an open transparent transaction.
It would be no different than what occurs in commercial transactions. Why is it you dont see multiple blind offers in commercial leases.. cause they have a solid open process.
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Patrick says
under the law (see below), we dont have an open market for a fair sale, nor are the parties fully knowledgable/informed, but we do have undo influence. And if you want to add further.. prices are affected by special or creative financing.
Not what I would call valid process of conducting a deal.
Commonly, the definition set forth for U.S. federally regulated lending institutions is used, although other definitions may also be used under some circumstances:
"The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale."
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Patrick says
Today yes, in the past no.. there were no fictional multiple bids when i bought. None of my friends and contacts experienced this before either.. but we never had bubble like this before.
If all these multiple bidders were real.. we certainly wouldnt have seen price drops because there would have been a supply of other buyers ready to buy.
But as we have seen, that didnt happen. Therefore it was all fiction.
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thomas.wong1986 says
Please describe that process. Do bidders on commercial property openly publish their bids?
I don't want government control of any prices. I just want honest reports of bids, not fraud.
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Los Angeles, CA
What Patrick describes is the typical big-gov democrat nighmare.
A law is passed with 'good intentions' by people who are clueless in that field. "All bids shall be publicly available on the internet for 10 days prior to selecting winning bid on real estate." or something.
THen you will get the 'fake bid from bro in law' AND mother in law to run up the price!
So people complain and law #2 says "all bids must have documented down payment and 15 other rules".
It all ends in soviet/cuba style nightmare where only the crooks,smarties, and gov employees can 'get by' and regular folks are left out of the game and lies rule the land (hey just like capitalism! lol )
Also I would point out here EBAY is the most efficient market yet. AND still filled with fake bids (from sellers bro in law) and a cancelled bids and also sometimes the seller wont honor the winning bid (it happend to me, he listed it CHEAP and i won then he said 'it broke, sorry have to cancel auction' lolz)
So I think Patrick is really 'wanting people to be honest' and thats just impozzible, sorry.
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We already have the Soviet style nightmare:
http://patrick.net/forum/?p=1208247
The 99% does all the work, yet a tiny elite get all the benefits, because they control the government with their money.
You didn't answer how the commercial property blind-bidding system is any better than for residential property.
I assume that means you support allowing fraudulent bids on commercial property too.
The problem is FRAUD. Theoretically, it's already illegal, but in reality, if you can pay lobbists in DC, somehow the laws get bent just for you.
We should most definitely have public bidding on real estate.
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thomas.wong1986 says
How do you know? Maybe everything your realtor told you was a lie designed to maximize his commission.
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Los Angeles, CA
Public bidding would be a joke with probably even MORE room for fraud.
If I am a listing agent instead of lying about fake bids and saying 'trust me' if I could SHOW YOU fake bids on the internet with real names (and u could call them up and ask them if they are real bids!) then I could get even more $ for a crap shack in menlo park.
Think about it. The realiitors will abuse public bidding to thier advantage - there is no other scenario possible especially when you look at the $$ spent by NAR in DC.
Again, look the mess ebay is as an example.
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Berkeley, CA
.Patrick says
I am not talking about ' phantom ' bids . I think that can happen in any property market the world over . It is illegal but it is something that you can watch out for and deal with.
Here is what I am talking about . Recently there was a house for sale asking $ 610,000 . Our buyers agent sat us down to write up a bid . They would not give us a figure on what would be a good bid or not . After some debate we made an offer of $ 626,000 . Our bid was rejected and weeks later we discovered that the house had been sold for 631,000 .
What is strange to me is that this system seems to work against both buyers and sellers . The seller will never know if I was willing to up the bid to $ 635,000 , $ 640,000 or $ 650,000 . Who knows where the price would have gone if the other bidders were really keen on the house .
On the other hand maybe I could have been the only bidder and could have cost myself $16,000 more than I needed to pay .
Now we have spotted another house that we really like . It is offered at $ 629,000 . But what to offer ?
It seems to me that realtors are operating a cartel and are engaged in open price fixing in the Bay Area .
To answer you question , both the Irish and British property bidding is just done over the phone . Both my experiences were of selling in a hot market . The Irish one was really nuts with prices going up by the day at one stage .
Most houses in Australia are sold by auction with the auction taking place outside the property either in the garden or if there is no space on the street and people just bid action style by raising their hand . You caan see who is bidding and what the price is . I have even seen commercial property sold like this . Once I stumbled into a auction of my locals banks building .
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Los Angeles, CA
I am finding in the last few years many americans are hamstrung in business (make poor choices maybe for example they trust a RE agent) by thier naive belief in fairness, open government, equal treatment, etc.
Also I have a theory which I cant prove that recent immigrants to america from communist/former communist countries reallllllly fit in VERY well here and do better than most of my lame high school friends. They somehow 'get it' that everything is fraud from one perspecitve or another, everyone is out for #1, and you gotta lie on the governenment paperwork since 'that is what they want'. etc.
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PockyClipsNow says
I've run into that perspective of the United States several times while talking to people who work outside the United States. One person told me that maybe he needed to change his business approach to be more "American" by doing what he considered lying.
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Los Angeles, CA
Well all humans are the same, its just that some people are naive and trusting.
Think of the dopes that fall for Nigerian scams.
Now think of these very same people buying a house! (they do!!!!)
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grinderman says
fake offers are common in the US... and in Canada.
The secret's out on phantom bids
http://www.thestar.com/News/GTA/article/256968
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Patrick says
There just wasnt. I low balled they countered, and we met in between. Many I know did the same. Never heard of multiple offers during when i bought. I suggest you survey people who bought their homes in the 70s, 80s to early 90s.. I cant speak what happened after 1998 or 2000. The world went insane afterwards.
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Patrick says
First come first serve, asking is published you negotiate and close the deal.
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PockyClipsNow says
You dont need big govt mandate on this, just good leadership. Just change the process on buying and communicate it to the public. Have an open buying process published on internet, advertised on radio and local TV stations until many start to follow the recommendated practices.
And no the realtors wont like it ...
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grinderman says
I'll bet you have amazing teeth.
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1sfrenter says
Never seen it, never heard of it. Perhaps you're talking about the foreclosure auctions where all sales are as is and there's no inspection period.
I've done several cash transactions recently and the sellers agent doesn't even ask. He/she just puts in the automatic 7 day inspection period.
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Bellingham Bill says
" If California could cut ties with the rest of the Union, we'd do OK. We've got ag, we've got tourism, we've got entertainment, and we've got tech. "
Please do!! The rest of the country is tired of bailing your housing bubble out. Californians were 75% of the problem. Keep your tax dollars, they still are not enough to make up for the home equity withdrawals that have made California think it is so wealthy and special. Hey Cali, your homes are still double what they should be and will be. Good luck.
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Ludwik Kowalski's website
Patrick says
That is a wise observation.
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... and once more, I'd be curious to know why you're even considering buying a house- especially one priced at such high levels- when you know you will be moving out of the country anyway. To me that makes absolutely zero sense.
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I made a couple of offers during the boom (pre 08), and my offer was not the highest. For these houses, the sale was published a month or two later, at a price higher than I offered. It's possible that the realtor personally bought the house in order to reinforce the illusion of multiple offers, but it seems unlikely.
of course, now is a different situation, and if one makes an offer on a house that's been on the market for 90 days, and another one suddenly pops up, that's suspicious. But during the boom, true multiple offers did happen.
Edvard2 is right about buying though, if you're going to stay here 5 years or less, buying is probably not worth it. You'll pay 6% for the sale, that's $36k right there for a $600k house. To me, the biggest benefit of owning is being able to stay in a place for many years and modify it as I see fit. But if your plan is to move in 5 years, that benefit is not relevant to you.