Written by: Stuart Foxman
In theory, auctions are a pure way to generate the market value of anything. People see what others are bidding, and the highest offer prevails. Yet in real estate it doesn’t always work that way.
“There were common frustration for consumers and realtors,” says realtor Daniel Steinfeld, CEO of On the Block (getontheblock.com/).
One is the lack of transparency. With blind offers, the seller doesn’t know if the people involved in a bidding war would have gone even higher given the chance. The buyers, meanwhile, don’t know how they stack up, or if they’re bidding more than they really needed to. As Steinfeld says, people are in the dark when it comes to one of the biggest decisions in their lives.
Working in the competitive Toronto market, “We observed a lot of things that we identified as potential improvements,” says Steinfeld.
He runs On the Block with his wife Katie, a seasoned real estate broker who serves as the firm’s president. Most of their business involves selling homes the traditional way. Two years ago, they introduced a real estate auction platform. About 10-15% of sellers choose that option.
Here’s how it works. Everything runs through a partner auction house called On the Block Auctions. The company compiles all the information people need to make an offer on a home without conditions. That includes a home inspection by an independent party prior to the listing (buyers can conduct their own inspection ahead of time if desired).
People who register to bid need to be verified and agree to a pre-authorized deposit amount on their credit card, applied only after a successful bid. That means every buyer takes the auction seriously.
On the Block completes the offer documentation in advance (closing date, items included in the sale, any exclusions). The only part of the agreement to fill in once the auction ends is the buyer’s name and purchase price.
Every buyer has access to the same information ahead of the auction date, with all details worked out. The sole variable in the process becomes the sale amount.
During an online auction, all offers are visible. Every buyer has a fair chance to increase their bid. Before the auction, the seller determines a reserve price, i.e. the lowest price they’re willing to accept. That means no risk if the highest offer falls short.
One recent auction had 46 bids, and the last 15 involved two people going back and forth. Steinfeld says the auctions have even become spectator sports, with people who aren’t bidding just watching the process. He assumes that many are realtors interested in seeing where this model (which has succeeded in Australia and the U.K.) goes here.
He and Katie are motivated to evolve the real estate industry and introduce new approaches. Steinfeld is a chartered accountant by trade, and spent almost 10 years with the CFL’s Toronto Argos in sales and as CFO. He uses his executive background to develop new strategies for On The Block, and challenge the accepted norms.
That includes some seemingly basic yet effective changes to traditional marketing. The signs that go on a seller’s property, for instance, never promote his and Katie’s faces and names. They’re selling a house, not themselves. The signs are customized, with professional pictures and details of the property. “Essentially, it’s a huge MLS listing,” says Steinfeld.
What kind of people is he seeking to join On the Block? His answer can also serve as advice for shaking up an industry, and apply to any start-up: “Have new ways of thinking and leverage tools that are maybe atypical.”
Photo credit: Zlatko Cetinic, Images Made Real