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.
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.
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.
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.
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.
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.
> 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.