Can't sell your house, time to try a novel approach.

Every now and then I am truly amazed by the ingenuity of people in times of adversity. I came across this article this morning and thought, WOW what a fantastic idea! Win for the seller, win for the buyer and the banks don't even get a look in!!!

A HOMEOWNER IS trying to break the property market deadlock by selling his house to the lowest bidder.

My reason for trying to sell my house in this manner is mainly due to economic circumstances in Ireland at the moment. Credit is virtually impossible to get so a solution was needed to be able to sell the property without the need for bank financing, ie, so the buyer does not need a mortgage. The one thing we have learned from the guys who run the distressed property auctions is that there is still a strong appetite among Irish people for property. The biggest issue is getting a mortgage from the banks and we think we have the solution for this.

Basic calculations would suggest that the process should pull in a gross total of €300,000 (€50 application fee x 6,000 bids) although Reynolds said it wasn’t yet clear how much he would actually get into his hand after auctioneer, legal and agent fees were deducted from that. David McDonnell of James B McDonnell & Co. said that Reynolds would still end up with over €200,000. The valuation of the property on the site is €165,000.

However, the winning bid will be the lowest unique bid. (For example, you can bid 1c if you like but if someone else also bids 1c, then the bid is not unique). Bidders are advised not to bid over €500. The winning bid is announced once 6,000 bids have been received to the site.

This house could be yours for under €500

Is this the way forward to get the housing market moving again?? Would you consider selling your house this way?? Would you bid on a house being sold in this way??

Thoughts...

Very interesting concept. Quite ingenious really!

I don't know if this would work in the US though. There are so many things you have to go through just to bid on a house anymore, and I'm sure the National Association of Realtor's would have a heavy hand in squashing a trend like this.

I'd like to see if this catches on.

reply to post by sheepslayer247


As I know nothing about buying a house in the US, I can't really comment on whether or not it would be feasible. I would imagine that it would be in the realtors best interest to get properties sold. As the money for the bids is also 'held' by the realtor/estate agent I'd expect that they would also make some money on any interest earned.

According to the article, this method has been successfully used in Germany and other European countries already, so it's not entirely unique, if I had a property to sell in this climate, this method would be getting some very serious consideration from me.

This morning I certainly didn't think I would be entertaining the idea of buying house now or at any time in the next few years. Do I think €50 for a bid is worth the gamble? Hell yeah!!

On the downside, would this create an artificial property bubble again?? Again, I don't have the knowledge to comment on that

reply to post by HighMaintenance

On the downside, would this create an artificial property bubble again?

I would have to look into the specifics and legality of this process, but I don't see any "bubble" that could come out of it!

There would not even be a loan involved. In essence, this method is like a raffle. Once there are enough bids to satisfy the seller, the lowest bid wins. The non-winning bids pretty much cover the entire cost of the home for the winner, and all they did was make an inexpensive bet in a game of chance.

I would put down a few hundred bucks for a few tries at getting the lowest unique bid.

I really hope this catches on and if I ever sell my home, I am going to look into this!

Taxes. Instead of that 300,000 being carried over to a new property, this gentleman is now going to owe taxes on that 300,000 as ordinary income. So he will be left with about $180,000 before paying the auctioneer which will likely leave him with less than an outright sale. And where is he going to go live?. This is a stroke of being different but it certianly is not a stroke of genius. Just like the lady that gave away her $100,000 house for a $20,000 van. They both somehow think they are beating the system, but in reality they are letting the system beat them.

reply to post by sligtlyskeptical


Yes there is the tax issue, having never bought or sold a house, I don't know what the tax obligation would be. From what I can make out after doing a bit of googling (yes I'm going to take a chance or two or three ... ) the only additional costs after the initial bid and paying whatever you have bid, would be the usual legal fees, stamp duty (exempt for first time buyers) and the land registry fee.

This particular gentleman lives in Germany and is selling his house in Ireland, so finding a new place to live is not the issue here.

reply to post by HighMaintenance


Some nice lateral thinking here. Very thought-provoking. S&F

As it happens you can obtain anything from a new Range Rover to the holiday of a lifetime using this same method:

Auctionair

"Very Clever" best describes this.

BUT, there must be some law against it. How can TPTB maintain control?

Smells like the freedom of BitCoin.

NOW, if you were to use BitCoin to pay for said auction, ZOMG, TPTB would be crapping masons AND their bricks.

Originally posted by sheepslayer247
reply to post by HighMaintenance

 

On the downside, would this create an artificial property bubble again?

I would have to look into the specifics and legality of this process, but I don't see any "bubble" that could come out of it!

There would not even be a loan involved. In essence, this method is like a raffle. Once there are enough bids to satisfy the seller, the lowest bid wins. The non-winning bids pretty much cover the entire cost of the home for the winner, and all they did was make an inexpensive bet in a game of chance.

I would put down a few hundred bucks for a few tries at getting the lowest unique bid.

I really hope this catches on and if I ever sell my home, I am going to look into this!

it would be so damm nice to get a real standard web editor.. grrrrrrrrr

anyways.. after 15mins of typing ididn't get what I wanted to say.. so here it is in a nutshell..

what would stop the realtors/flippers/investors from grabbing all the houses on the market and re-sell at standard lowest price the market is at ?? Example; owner gets lowest unique bid of $1000.00 from a realtor/investor .. they in-turn flip it for $25,000.00~! CHA-CHING !

reply to post by pause4thought


I was aware of the lowest unique bid sites that are all over the internet, they never quite appealed to me, my brain seems to scream 'scam' at me for some reason, but that's just me. If I need to buy something specific, like a holiday, flat screen or a car, the biggest 'chance' I'd take is placing a bid on ebay. But this feels very different, perhaps it's because they have been completely open and honest about how much money is going to be made on the house when all 6000 bids are in and like sheepslayer said, it's kinda like a raffle, even if it is not the usual €3 per ticket or 3 for €5 . As a potential bidder I am firstly going to take a day trip to go and see this house, just to make sure the house is sound and in order (caveat emptor) and I'm also fully aware that this is a 'game of chance'. As a seller, how can you lose?? (Unless of course you choose a dodgy agent that's not bonded who scarpers with all the bid money..)

I do believe it's an excellent alternative to selling a house that I really hope takes off here as it is all legal and perfectly above board. It would help so many people to get rid of the millstone around their necks and enable someone, like myself, who would love to own their own home (MORTGAGE FREE!!) but can't right now, to do so at a fraction of the cost IF they were the lowest UNIQUE bidder.

Also there would be nothing to stop a winning bidder selling the house immediately after winning using the same method either, a 1/6000 chance of winning 200 000 plus, that's got to be better odds than the lottery (even with the taxes!)

reply to post by Komodo


Well if they pays their €50 why shouldn't they have a go . In this case the bids are sealed so neither the agent nor the seller will know what the lowest unique bid is until all 6000 are in.

Originally posted by HighMaintenance
reply to post by Komodo

 

Well if they pays their €50 why shouldn't they have a go

. In this case the bids are sealed so neither the agent nor the seller will know what the lowest unique bid is until all 6000 are in.

Oh I see, now that changes the game quite a bit.. however..

ok .. i'm a little confused actually, I've been to farm / some other types of auctions before, but it's not my forte'...

example:why would you want to sell a house for $100,000.00 if I bought it for 200k?

I get it, there's a entry fee lets say of 10k, which qualifies you to make the bid, however, you'll never see the 10k if you don't win the bid ;D

HUGE risk involved, but, if you win the unique lowest bid, you just bought the house for 10k that is worth 200k~! Wow~!!!

reply to post by sheepslayer247

There would not even be a loan involved. In essence, this method is like a raffle. Once there are enough bids to satisfy the seller, the lowest bid wins. The non-winning bids pretty much cover the entire cost of the home for the winner, and all they did was make an inexpensive bet in a game of chance.

Wow, this is a BRILLIANT idea. Though I think it would work better if it wasn't based on the lowest bid, but rather a number from a set range would be picked beforehand, and the closest unique bid to that number would be the winner.

reply to post by Komodo


I can see where the confusion lies . This is an auction but nothing like a 'normal' auction.

This is basically how it works in a nutshell:

House owner needs to sell the house. No one can buy it because the banks aren't lending. So the house needs to be sold at market value (or even at a profit) without any involvement from the banks.

The 'fee' to bid is not €10 000.00 it's only €50.00 per bid BUT there has to be 6000 bids made in total before the auction is ended (6000 x €50.00 = €300 000.00). When you place your bid you pay €50.00 and then GUESS an amount (any amount between €0.01 and €500.00), then cross your fingers and hope no one else chooses the same amount that you did. If someone DOES choose the same amount as you, you're bid is NOT unique and is no longer valid in the auction. If no one chooses the same amount you did your bid IS unique but in order to win it has to be the lowest, so for example if you chose €12.53 and no one else did your bid is unique but if someone else chose €12.52 and their bid was also unique, you would lose and they would win the auction if there were no other unique bids lower than that amount. They then pay the €12.52 plus any of the normal fees associated with BUYING a house (excluding any fees to set up a mortgage because you won't need one!!!) and they then own the house for a grand total of €62.52 (€50.00 bid fee + €12.52 actual bid). Keep in mind that you are competing with 5999 other bids, so it really is a game of chance! And IMO €50.00 is not a life changing amount of money to lose if you don't win.

As for the seller, in this particular case, he makes €300 000.00 on a house with a market value of €165 000.00!!! Once the seller has paid the realtor/auctioneer/estate agent and any other legal fees associated with SELLING a house he walks away with over €200 000.00. (Whether or not he has to pay tax on that amount, I have no idea )

I hope that explains how it works and I haven't confused the issue even more . As Einstein said: if you can't explain something simply, you don't understand it enough, but I think I do . Just change the € symbol to a $ symbol and it'll be relevant in your currency

reply to post by ChaoticOrder


This is pure speculation on my part but I would say that the reason a number is not chosen beforehand is to eliminate any chance of cheating. As I said in a previous post, all 6000 bids will be sealed until the end of the auction so NO ONE, including the auctioneer and the seller, will know until the very end who has won. It also states very clearly in the T&C's of the auction that if you are caught trying to hack into the bids to see what has been bid, your bid will be null and void.

reply to post by ChaoticOrder

Though I think it would work better if it wasn't based on the lowest bid, but rather a number from a set range would be picked beforehand, and the closest unique bid to that number would be the winner.

That would work as well, but only if there was a transparent way to choose that preset "range". Otherwise the process can be compromised and corrupted.

In my opinion, the lowest-bid process would encourage investors of all income levels.The lowest unique bid could be, in theory, one cent! The largest cost would be the application fee multiplied by the number of bids you placed. Making it easy for the middle-class family to compete with the wealthy investor. The investor may be able to afford more bid attempts, but with a unique-bid process the odds aren't that great and would be unwise to flood the sale with massive amounts of bids.......exspecially if it costs $50-$100 a bid.

reply to post by HighMaintenance


yep .. got it..

and the banks get zero ) I wike it !!!

Originally posted by sheepslayer247
reply to post by ChaoticOrder

 

Though I think it would work better if it wasn't based on the lowest bid, but rather a number from a set range would be picked beforehand, and the closest unique bid to that number would be the winner.

That would work as well, but only if there was a transparent way to choose that preset "range". Otherwise the process can be compromised and corrupted.

In my opinion, the lowest-bid process would encourage investors of all income levels.The lowest unique bid could be, in theory, one cent! The largest cost would be the application fee multiplied by the number of bids you placed. Making it easy for the middle-class family to compete with the wealthy investor. The investor may be able to afford more bid attempts, but with a unique-bid process the odds aren't that great and would be unwise to flood the sale with massive amounts of bids.......exspecially if it costs $50-$100 a bid.

edit on 4-2-2012 by sheepslayer247 because: (no reason given)

the min unique bid creates a 'fail safe' of sorts for all party members..

I think it's a genius move !

reply to post by sheepslayer247

That would work as well, but only if there was a transparent way to choose that preset "range". Otherwise the process can be compromised and corrupted.

There are many ways it could be done.

In my opinion, the lowest-bid process would encourage investors of all income levels.The lowest unique bid could be, in theory, one cent! The largest cost would be the application fee multiplied by the number of bids you placed. Making it easy for the middle-class family to compete with the wealthy investor.

With a random number picked from a set range, low bids would still have an equal chance of winning against high bids, because no one knows what the actual number is. With the lowest unique bid, people will be inclined to bid lower amounts, just because they know that's where the winning bid will be. It will take longer to get the total amount of money needed to cover the house in that case.

reply to post by ChaoticOrder


The only problem with having a preset number is that several people may pick the same number, how would you determine a winner in that case? A preset range has been established in this case, albeit a very big range €0.01 to €500.00.

ETA: The auction has no set time, it ends when 6000 bids have been made, no more, no less. If you bid after that amount of bids have been received, you'll be refunded.