> you bid what you think the house is worth

Except you're rarely sure how much it's worth. The market is fluid, the psychology is working on you, and the feedback takes too long that by the time you know how much you missed it's too late to learn much from it.

You say that, but the fact you didn't bid $25k+ initially tells us otherwise, no?

Here in DC metro, people are massively over-bidding (relative to list price) because they've already bid/lost 5-10 homes in the last few months. So, they go in strong, $100-$150k over on a $600k list price isn't uncommon right now.

> You say that, but the fact you didn't bid $25k+ initially tells us otherwise, no?

That doesn’t follow at all. You are going to bid the minimum amount you think can win the auction, not your max price you are willing to pay.

If you want people to bid the max amount they are willing to pay, you would want a Vickrey auction, where everyone presents a sealed bid, and winner is the top bid… but they pay the price of the second highest bid. That way you can bid your actual max price without worrying about bidding against yourself.

https://en.wikipedia.org/wiki/Vickrey_auction

Why this focus on list price?

In a hot market with little supply, a list price is a marketing tool to get people into the door, and for a selling realtor to be able to brag about how good they are.

That’s it. It has been like that for years. It doesn’t make sense to post a list price that is too high or accurate (unless you don’t want the hassle to deal with multiple bidders.)

1500 sqft houses in my formerly middle class SV neighborhood are listed at $2.5M and sell for $3.5M within a week. Everybody knows that this $2.5M is imaginary. If you want to know what a house will really sell for, just look at the sales of the past 2 months. It’s a much better indicator.

It's just a reference. A bids/closings so far over list is relatively new to this market; the last time we had anything similar was the lead up to the 2008 crash.

More typically, a "$500k" house would list for $480 and close at $520 or maybe $550. Today, that same house is listing for $599 and closing at $700+. Not only have the prices gone up, but they've gone up fast enough that nobody really knows what a home is worth until it closes.

Blind bidding leads to more conservative offers because noone wants to grossly overbid on a house. The ceiling is basically what you think is "fair". The seller will then make a decision with very little back and forth - generally they will give you one chance to "improve" your offer.

Now, in an open bidding system, you are literally in competition for who can/is willing to pay the most for the home. The ceiling is what you can/willing to afford - back and forth with other bidders until literally the highest price is extracted.

The only way your bid gets accepted is when you overbid. If your "fair"/"what it's worth" offer gets accepted, you have overvalued the property.

> generally they will give you one chance to "improve" your offer

Of course, you have no idea what you're competing against, or if there even is a higher offer.

> in an open bidding system, you are literally in competition for who can/is willing to pay the most for the home.

This is true for blind auctions too.

> The ceiling is basically what you think is "fair". > in an open bidding system ... The ceiling is what you can/willing to afford

I don't see any reason why you couldn't set the ceiling to what you think is "fair" at an open auction.

That kind of rationality is rarely found in a hot market. You'll essentially be driven to massive overbidding due to the highest bid in the group. In a big enough market with enough demand, you can be sure that high bid will be well beyond a rational amount. Fairness has essentially nothing to do with it.

Once you lose 5-10 bids, you'll either give up on owning a home, move to the country or start upping your bid to suit.

Confirm this is the same in Austin. We moved from a blue state last year and kept losing conservative bids. We decided to go all-in on the next place and got it. What a stressful situation!

That doesn't make sense. If you really bid what it was worth to you, why were you disappointed that the house went for more because you would have paid it (and more)?

“what it’s worth” is just the maximum you can possibly afford when the alternative is never owning anything.

If your perspective is that people will sacrifice anything to own a home, then home prices are quite undervalued and have been for a long time.

It’s kind of like how insulin is undervalued when there’s supply chain issues