The Secret Behind Auctions (And Why You Should Care)
Quick Take: Most LA homes are already selling via auction-style psychology, even if no one calls it that. Understanding how to trigger the right kind of bidding war - without distress-sale optics - could be the single most powerful strategy to sell your home for more.
Table of Contents
- Why Auctions Work—Even When They're Not Called That
- The Real Estate "Auction" No One Talks About
- The Biggest Pricing Mistake Sellers Make
- How This Plays Out in LA Right Now
- FAQs
Why Auctions Work—Even When They're Not Called That
I’ve been in the auction world for years - from Christie's to Sotheby’s, from flipping antiques on early eBay to helping buyers compete for homes in Los Angeles. One truth cuts across all categories: competition fuels desire. Scarcity fuels urgency. And social proof overrides logic.
That’s the psychology of auctions. And in real estate, it’s happening every day - even if no one calls it that.
The Real Estate "Auction" No One Talks About
In the U.S., real estate “auction” still carries stigma. People assume it means desperation or foreclosure. But here’s what most sellers and buyers miss:
Every time a home is listed at a sharp price and generates multiple offers - it’s an auction.
- Price low to generate interest
- Attract a crowd of buyers
- Let them bid against each other
- Push price up through competition and emotion
That’s not theory. That’s what happens in Los Angeles almost daily. We just don’t label it “auction.”
Take “The One,” the $500 million Bel-Air mansion. It didn’t sell traditionally. It eventually auctioned for $126 million. Even ultra-luxury has its limits when it ignores market psychology.
The Biggest Pricing Mistake Sellers Make
Most sellers price high, thinking they’re leaving room to negotiate. What they’re actually doing is killing momentum. Instead of sparking a frenzy, they create doubt. And doubt doesn’t sell homes.
Here’s what smart pricing really looks like:
- Start low (but strategically)
- Let demand stack up
- Use social proof and urgency to push offers higher
- Choose the best terms from multiple motivated buyers
Compare that to overpricing, which leads to a Dutch auction - price drops over time that signal weakness. It’s a slow, painful race to the bottom that almost never ends well.
Christie’s didn’t price Salvator Mundi at $450 million. They started low and let emotion take over. It sold for $450 million because bidders felt the moment. Real estate works the same way.
How This Plays Out in LA Right Now
Today’s market isn’t normal. Demand continues to outpace supply. We recently sold a home that got 31 offers. That’s not luck. That’s strategy.
In a competitive market like this, underpricing - done right - is safer than overpricing. There’s no fixed market value. There’s only perceived value, and perception is built through process.
For sellers: the only way to find out what buyers are truly willing to pay is to make them compete.
For buyers: unless you’re the only one offering, you’re in an auction - whether it’s called that or not. The faster you recognize that, the smarter you’ll play.
And if your agent isn’t skilled at managing that process? You could be leaving six figures on the table without ever knowing it.
FAQs
Why is underpricing better than overpricing in real estate?
Underpricing can spark a bidding war and drive the final sale price above expectations. Overpricing often leads to price cuts and longer days on market, which erodes buyer confidence.
What is a real estate Dutch auction?
A Dutch auction starts high and gradually drops the price until someone bites. In real estate, this approach typically backfires because it signals desperation rather than value.
Are auctions only for distressed homes?
No. That’s a myth. Luxury homes, investment properties, and even fine art use auction dynamics to maximize value. It's all about how the process is framed and executed.
What’s the difference between a bidding war and a traditional sale?
A traditional sale usually involves one buyer and negotiated terms. A bidding war pits multiple buyers against each other, often leading to higher prices and stronger terms for the seller.
How do I know if my agent can manage a bidding war?
Ask them how they structure offer deadlines, pricing strategies, and buyer communication. If they don’t understand auction psychology, you may be leaving money on the table.
Want to create a bidding war for your home?
Book a 20-minute strategy call . I’ll walk you through how auction-style psychology can unlock tens or even hundreds of thousands in additional value - without ever using the word “auction.”