Why not crack down on bidding wars?
OK, the headline sounds a bit ominous here.
But really, why should we just accept as unchangeable all the shenanigans real estate agents use to drive up the price of a home?
Bidding wars were a real problem during the boom years, one crucial part of a whole series of factors that sent housing prices spiraling out of control.
And, after a breather during the downturn, we started to see bidding wars all over again for modestly priced homes during the run-up to April 30th, when the home buyer tax credit finally breathed its last.
BrokerMike, in a great comment yesterday, raised excellent questions on whether it is really practical or possible for the government to get involved with policing this kind of activity.
But he also offered a fascinating insight into how brokers can use "phantom buyer(s)" to keep the price of a home headed north.
"Just because your agent says there are other offers or that there will be other offers any minute or that you have to offer X to get the house, in many cases, this is just smoke and mirrors," BrokerMike writes. "What caused a buyer to pay too much even in the absence of a bidding war (often by a phantom buyer(s) which I pull out of my broker's hat.)"
But it may not be so hard after all to regulate bidding on homes, especially with the explosion in online bidding platforms we have seen over the past few years.
Bill Wendel of the Real Estate Cafe, who has championed this cause for years and who has raised the idea of an online petition, notes there is already a particular platform in place that would allow home buyers to put in offers and view the competition. (Thanks Bill as well for some excellent Twitter feeds from yesterday's conference on the Fed that looked in part at the factors that inflated the housing bubble.)
That would allow a savvy buyer to see what he's up against and keep bidding or not based on real counteroffers, not phantom buyers.
For my part, I am going to lob calls today to the chairs of the housing committees in the House and Senate on Beacon Hill, as well as to U.S. Rep. Barney Frank's office.
The federal government doled out billions in home buyer tax credits, but how much of that money simply vanished in a frenzy of price gouging by real estate agents? And why not look into ways to head off future bidding war machinations by bringing a little transparency into the process?
Certainly these seem like subjects worthy of further investigation to me.
We will see what I get.
