patrick.net

errc says

Sellers ditch the Buy it Now model for Auction pricing

Auctions can and are often fraudulent. Hidden reserve prices, shill bidders, hidden fees are just a few ways to run deceptive auctions.

My solution solves all of these problems by completely removing the perverse incentives.

How are you going to do that?

Let's start with I want less government not more, so no, I don't want to see more laws. Second, I don't like the premise because the property should go to the highest bidder. If you are asking $500K but people/the market bids it up to $800K, why should I be forced to sell it for $500K. Third, there is an easy work around the people would figure out quickly. My property is worth $500K but due to Patrick's law (give credit where it's due) I'll list it for $900K. I can and will take a lower offer but the law forces me to set a ceiling price so I'll set that ceiling REALLY REALLY high.

There are always shills at an auction, it is expected, so what?

What happens if a dealer advertises he's got a particular car model on sale, and then when people show up he tells them he's had so many offers the car is now $5000 more expensive?

If you advertise a price, that's the price. Otherwise you can take it to auction.

Rather than writing new laws, buyers should ask themselves "Does it ever make sense to take on an enormous amount of debt when all information concerning the transactions is guarded by a third party who has a conflict of interest to always gouge me?" If that premise makes sense to you, you don't need a price disclosure law, you need an anti-ass-raping law.

Buyers should always go into the transaction assuming NOBODY is really looking out for their interests but themselves. Don't trust anyone else's idea of how much you can afford. Or how much you should bid. Or whether you should increase your offer. Everyone has different incentives that don't perfectly match up with yours.

The only person looking out for your interests is you. That's pretty much true in life

NuttBoxer says

all information concerning the transactions is guarded by a third party who has a conflict of interest to always gouge me?" If that premise makes sense to you, you don't need a price disclosure law, you need an anti-ass-raping law.

The breaking up of the monopoly on the information is the anti-ass-raping law.

joeyjojojunior says

The only person looking out for your interests is you. That's pretty much true in life

How do you look out for your interests when the information about all transactions is hidden and/or manipulated?

"How do you look out for your interests when the information about all transactions is hidden and/or manipulated?"

Oh, but it's not. House sales prices are readily available. It's simple to look at recent sales prices in your neighborhood, pictures from that listing, time on market, price/sqft, etc.

All the info is out there.

joeyjojojunior says

All the info is out there.

Absolutely not out there.

Even the house sale prices are routinely manipulated. Realtors eliminate low sales from their comps, with a variety of excuses ("not representative", etc). An alternative mechanism is to overpay the transfer tax. An extra $100 can make the house sale price appear $100K higher, etc. (Sale price is not recorded in San Mateo County, only transfer tax from which sale price is "estimated")

They have the means, motive, and opportunity to fake bids to get you to pay more, so why wouldn't they do it? Because of "realtor ethics"?

This just seems to be the way the game is played these days. A high priced home will sit while a lower priced one is bid up. Weird? Sure. But in the last exchange I participated in, we sold and bought after our (above asking) offer was accepted over other lower offers. We listed our place at about five k below what we actually wanted to get for it, and had several bids right away, which we countered for "last best offers." One came back five k higher, right where we wanted to be anyway, so we went with them.
Anecdotal sure, but that's how it looks from the inside.

APOCALYPSEFUCK_is_ADORABLE says

There is no way to tell if most or all of the bidders at an auction are straws in the employ of Realtors.

In online auctions, they are all bots.

"Absolutely not out there."

It's publicly available. Hell, go to Redfin or Zillow and look at recent sales. It's a bit delayed there, but still gives you a pretty good idea of the market. Plenty of information for you do decide what you think a house is worth.

You're not seeing all the recent sales.

indigenous says

How are you going to do that?

Notarize all bids and post them on a publicly available web site.

"You're not seeing all the recent sales."

I guess it depends on where you live. In many(most?) places, property taxes are determined by sales price so those prices are diligently recorded and accurate. They definitely wouldn't be overstated else the new owner gets a shock when his property tax bill arrives.

That should be the law

@Patrick, what is going to prevent each listing to just be something like: "One Billion or best offer", knowing fully well that the purchase price will be far less?

rando says

The breaking up of the monopoly on the information is the anti-ass-raping law.

Ahh, vis-a-vis Ron Paul's Audit the Fed bill(for the purpose of ending the Fed). You are much more patient than I. Any system that obviously corrupt will only gain my participation when its time to burn it down.

The better way to attack this is with state nullification as in the 10 amendment center.

And the much under appreciated Jury nullification.

The much bigger problem is the 4th branch of government, I think Tom Woods is doing a show on this today or tomorrow.

CDon says

Patrick, what is going to prevent each listing to just be something like: "One Billion or best offer", knowing fully well that the purchase price will be far less?

That's fine, because it's not fraud.

Asking $100 or best offer *is* fraud.

The lie is that they might possibly accept the asking price. Which they will not.

I have to agree with Patrick here. The game is rigged to favor sellers which relies on real estate agents. The only losers are buyers. (especially if homes are competed for)

If buyers don't like it, buy a new home (firm price) and the buyer ends up even worst off.

Actually, sellers also lose with realtors!

Realtors routinely "lose" or "forget" about offers which do not give their own agency both sides of the commission.

This is why I also have this proposal: "Require notarization and publication of all bids on real estate."

Have not written it up as a post yet, but I will.

You are correct.

In Ohio, it's that way... in fact if you offer asked ng, the selller must accept the offer.

Patrick says

Unethical real estate agents (but I repeat myself, lol) in California normally ask prices for properties lower than the buyer would refuse to ever accept.

Why would they do this?

The answer is that lying about the acceptable price is a well-established fraud which has proven effective in cheating buyers out of their money. The fraudulent advertisement of an unacceptably low price as if it were acceptable consistently provokes naive buyers to bid more than they otherwise would bid.

The idea is to make the market look super-hot to encourage the highest bidders to bid even more. Once the house is sold, the realtor can breathlessly claim that there were many bids and the house sold over asking when in reality, those bids were cruel and fraudulent lies, and the house would never have sold at all if the only bids were actually at the asking price.

We have laws against

LarryPatrickMaloney says

In Ohio, it's that way... in fact if you offer asked ng, the selller must accept the offer.

Thanks @LarryPatrickMaloney what an excellent law or ruling, lol!

Can you point me me to link about that if you have time?

Patrick says

Require a publicly advertised price for a house to be a legally binding offer to sell at that price

So do something other than bitching on patnet if it bothers you so much. Put together a referendum, get it on the ballot, and let people vote on it.

Why would someone who is a renter even care? No one makes anyone bid anything. The way it works for real buyers is you make your offer and if it doesn't get accepted move on. A contract is only binding once both parties accept it.

Patrick says

Unethical real estate agents (but I repeat myself, lol) in California normally ask prices for properties lower than the buyer would refuse to ever accept.

I have no idea what "prices for properties lower than the buyer would refuse to ever accept" would possibly mean. The buyer makes an offer, the seller accepts it. What low price would the buyer refuse to ever accept?

The seller signs a listing agreement with the realtor which stipulates the price. The realtor is bound by it. They can't advertise some lowball price without making a new listing agreement. Anyone with an above room temperature iq can come up with comps in less than a minute.

LarryPatrickMaloney says

In Ohio, it's that way... in fact if you offer asked ng, the selller must accept the offer.

Simply not true. The seller is never forced to accept an offer. The seller would be liable to the realtor for the commission if a full price offer was refused. http://ohiorealtors.org/2014/02/03/legally-speaking-the-case-of-the-reluctant-seller/

bob2356 says

The seller is never forced to accept an offer. The seller would be liable to the realtor for the commission if a full price offer was refused.

This is the vehicle for what Patrick is asking.

But then Realtors win more, which is disconcerting.

If a store advertises a toaster for sale for $20, and then when you get to the store refuses to take less then $30, that's called "bait and switch" and it's illegal.

Just saying that we should enforce the same thing for houses.

No one should ever be liable to a realtor for anything.

rando says

If a store advertises a toaster for sale for $20, and then when you get to the store refuses to take less then $30, that's called "bait and switch" and it's illegal.

Just saying that we should enforce the same thing for houses.

No one should ever be liable to a realtor for anything.

I don't see how it will make any difference. Houses are always going to sell for the highest bid, regardless.

It may change the way the game it played, but won't really make much real difference.

bob2356 says

I have no idea what "prices for properties lower than the buyer would refuse to ever accept" would possibly mean.

Oops, meant "seller". Corrected now. Thanks.

joeyjojojunior says

I don't see how it will make any difference. Houses are always going to sell for the highest bid, regardless.

First, no, they frequently do not sell for the highest bid. Some bids are "weaker" than other because of financing, and other bids maybe never get seen by the seller at all because the agent is trying to get both sides of the commission for their own agency.

But you know, you're right. If we just had public and notarized bids, that would eliminate a lot of the games realtors play which harm both buyers and sellers. Maybe I should drop this one and concentrate on public notarized bidding.

rando says

First, no, they frequently do not sell for the highest bid. Some bids are "weaker" than other because of financing, and other bids maybe never get seen by the seller at all because the agent is trying to get both sides of the commission for their own agency.

OK--"highest" is the present value of offer which includes risk of the deal not going through. And if the agent is not showing all bids, that is fraud and illegal. Making the listing price a binding offer will not change that in the slightest.

rando says

But you know, you're right. If we just had public and notarized bids, that would eliminate a lot of the games realtors play which harm both buyers and sellers. Maybe I should drop this one and concentrate on public notarized bidding.

Granted--I'm not a realtor, but I find this conspiracy theory, like most on here, to be greatly overstated. The cost/benefit of not showing all bids to a house seller seems very low. Like someone lying on their expense reports--I'm sure it happens now and again because some people are idiots--but why risk a good job over a hundred bucks? But, I find it very hard to believe that it is prevalent.

"First, no, they frequently do not sell for the highest bid. Some bids are "weaker" than other because of financing, and other bids maybe never get seen by the seller at all because the agent is trying to get both sides of the commission for their own agency."

You got to be a retard to hire that kind of agent or cant see through that stuff.

There are hundreds of agents, its not that hard to pick the right one.

While not being a fan of tactics of realtors like this, I think they can get away with it because buying a house is like an auction - maybe with a reserve.

Not a perfect analogy, but you get the idea.

This obviously wouldn't work, becasue it would be even more subject to abuse by corrupt realtors than the current system. IT would mean that it's the first buyer at that price gets it.

This proposal would assume a contract where there is none. This violates basic property rights. I'm sorry, Patrick. I do feel your pain, and came to this site originally because of the same struggles. Of course, you're in the most difficult market in the USA, and that's got to be especially frustrating. Best of luck, and I mean that!

Why is it true for toasters but not houses then?

If a store advertises a toaster for $40, it cannot raise the price just because you want to pay that price.

Maybe businesses are held to a stricter code of conduct than private individuals, or perhaps real estate, being that each property is technically unique, gets special treatment in the world of property.
We also don't pay toaster taxes each year based on the value of our toasters. We do pay vehicle taxes, supposedly to support the maintenance and construction of the roads and waterways they use.

In the case of homes, how would the sellers distinguish between identical full price offers if each buyer had the right to buy the house for that price? If several offers were straight no contingency cash offers?

I'd have no problem with the buyer accepting whichever offer they like, as long as they accept their asking price from somebody.

What I'm objecting to is outright fraud: asking a price you will not accept.

To ask a price is to offer to house for that much money. To then reject a qualified offer for that much money clearly shows that the asking price was a lie.

rando says

Why is it true for toasters but not houses then?

If a store advertises a toaster for $40, it cannot raise the price just because you want to pay that price.

Morality is based on the dual pillars of cooperation and reciprocity. This is why people are mean while driving, but nice while walking on the street or interacting with neighbors (for the most part). It is also the reason your local supermarket is much nicer to you than the car dealership or retailers. In the former case, the business makes a lot of small repeated sales that add up over time. They have a vested interest in a long-term relationship with you, and thus not fucking you over. In the latter case, the business makes a single, huge sale and probably never sees you again. They are motivated solely in fleecing you during that one opportunity. There is no incentive to be nice, and plenty of incentive to be mean.

The same holds true for short-term and long-term sexual relations. Relationships between men and women have suffered greatly because they shifted to short-term, and neither man nor woman has the incentive to be nice or to look out for the other party's interests. Long-term relationships, whether business or personal, are always more healthy and mutually beneficial than short-term ones. Game theory predicts far more defection in any short-term game.

A final example is that we live in the most peaceful time in history precisely because of commerce between states, which requires long-term cooperation. Nation-states used to invade each other because the short-term gains outweighed the risks and long-term consequences. Today, war between two industrialized trading partners seems ridiculous and implausible. You don't bomb the factories that make your electronics. You don't kill your customers -- well, unless your a drug dealer like Big Tobacco and plan to replace them with new ones.

Pretty much all evil can be traced back to short-term thinking. Good really is more profitable in the long-run. Again, this is all laid out in Game Theory.