Boston Real Estate Developers Weigh Pros, Cons Of Condo Auctions
Boston Condos for Sale and Apartments for Rent
Boston Real Estate Developers Weigh Pros, Cons Of Condo Auctions
Although the auction format is a terrific way to sell homes, they haven’t caught on around here much. It’s more work (for the agent); they’re risky; they might backfire on you; and just the general unfamiliarity with the concept keeps them from happening much locally.
But in the one area where agents deliberately low-price homes and let the animal spirits take over is still booming. It’s probably not an accident that it’s still the most-expensive area in the country:
Rajul Jain and Vivek Shivhare had been home searching for a few months when they found the perfect place in the hills above San Jose – a three-bedroom, three-bathroom ranch that would provide enough room for them and their teenager daughter. It was listed for $1.68 million – within their initial $1.8 million budget.
They put in an offer $70,000 over asking, hoping it would be enough to acquire the house. Instead, they encountered a familiar Bay Area home-buying experience: a bidding war.
The sellers had two other offers, and the couple hadn’t come in on top. They raised their offer to $1.8 million, then to $1.82 million. Finally, their offer reached $1.86 million – $180,000 over asking. It was enough to win the house.
The process “was a surprise,” Jain said. “We definitely felt we had to increase our offer price based on the competition.”
Here in the Bay Area, prices have little meaning. Rather than signaling what a seller hopes to get, they function as the opening bid at an auction, agents and buyers say, with sellers hoping a low price will intensify excitement and create a bidding war.
Across the country, 32% of homes sell for above the asking price, according to real estate listing website Redfin. But in the five-county Bay Area, as of 2024, the share is 61%. That’s an increase from 58% in 2023 – the worst year for home sales in 15 years.
Underpricing is a common strategy in hot markets, where agents expect demand to drive multiple offers. It’s typically used in luxury markets, where buyers are more willing to stretch their budgets to capture a house. For in-demand cities like Berkeley and Sunnyvale, nearly 80% of homes sold in 2024 went over asking. In Fremont and San Jose, the number is closer to 70%.
But often, it’s much more. In February, Jodi Nishimura of Kai Real Estate listed a hexagonal 1,378-square-foot mid-century home in the Berkeley Hills with views of the bay. The asking price? $795,000.
Nishimura hosted two open houses and set a deadline for offers. Thirty came in — more than Nishimura had ever received. The winning bid was $1.6 million. While she expected the home to sell above the asking price, Nishimura didn’t expect such an extreme difference.
Often, buyers go into the Bay Area market unaware of the underpricing game — it’s not until they’ve been outbid a few times that they begin to understand the strategy.
“It’s a lot of extra work and can end up wasting buyers’ and agents’ time,” said Matt Castillo, an Oakland-based agent. “Buyers get their hopes up for something they don’t have a chance of getting in the first place.”
Buyer Adi Dasgupta was frustrated that the underpricing strategy meant that he had to rely on an agent to tell him what they thought the sales price would be. But Dasgupta felt that his agent’s incentive – to get him to place the highest bid in hopes of a larger slice of the commission – wasn’t aligned with his – to put in the lowest possible bid that would still win the house.
So Dasgupta, a social science researcher, built his own statistical model to predict a home’s selling price based on what comparable properties sold for in the previous year.
“I felt like the model was getting closer to the truth than what our agent was telling us,” Dasgupta said.
When Dasgupta found a property he liked, he plugged it into his algorithm, which convinced him to put in a bid slightly under what his agent advised. It was enough to win the house.
For agents, underpricing properties also has another clear benefit – they are more likely to sell quicker, said Bennie Waller, a professor of real estate at the University of Alabama who studies pricing strategies.
While keeping a home on the market for, say, a month could end up attracting more bidders and higher offers, an agent would only end up netting a small amount more in commission, versus selling two houses in that time.
“It’s like a busy restaurant, where the staff want to turn over tables as quickly as possible,” Waller said. “Agents want to list these properties so they can sell them and move onto the next one.”
But some agents are rejecting the underpricing game in favor of more transparent pricing, which they say leads to fewer bidding wars, and offers closer to what sellers expect.
“I get fewer offers on my listings, but I am getting top dollar for my clients,” said Julie Wyss, an agent based in Los Gatos. “That’s two different things.”
“Agents will say, ‘I got multiple offers’ as a badge of honor,” Wyss added. “It means nothing.”
Pushing buyers into bidding wars can also leave them with a sense of bitterness, or the worry that they’ve overpaid, said Gina Marciana, a Compass agent who focuses on San Jose’s upscale Willow Glen neighborhood. “It doesn’t always make for a nice escrow,” she said.
And sometimes, underpricing doesn’t work out for sellers.
Jordan Jewell, 32, and his partner, Helen Seldin, 33, were considering a home priced at just under a million dollars in Berkeley, but figured that it would sell for closer to $1.2 million, which was out of their price range.
But the seller rejected the first two offers that came in because they thought they were too low. After the home languished on the market for a few weeks longer, Jewell and Seldin made an offer of $1.1 million, which the seller accepted.
“You have this stupid system where if you price it for the price you want, people think you actually want more than that,” Jewell said. “It’s hard to break the chain unless some agents say, ‘We’re pricing for the price we’re looking for.’”
But many agents say that the underpricing strategy is so entrenched here in the Bay Area that it’s impossible to change.
“Because it’s been done like this for so long, if we list a home at a transparent price, it just sits there because buyers think it’s going to go over,” said Norah Brower, an agent based in Oakland. “In other parts of the country, you list it at a particular price, and it usually goes for that price or under. It just doesn’t work that way here.”
Boston Real Estate Developers Weigh Pros, Cons Of Condo Auctions
It may have been a good idea to launch the auction format on an industry-wide basis during the hot Boston condo for sale market. But how about now? They are still a good idea because auctions bring transparency and certainty to the home-buying process, which buyers would appreciate and make them more likely to engage. Excerpts from article linked below:
If a Boston condo for sale has been listed for a long time without much interest, it may be overpriced, according to Mr. Lesnock. During the pandemic, heightened demand has created bidding wars among buyers, with some prime properties selling within days of listing. If a residence isn’t getting any traction in one of the hottest real estate markets of the modern era, there’s a problem.
“Why is it not selling? It’s the windiest day on record, why is this kite not flying, right? That’s the way to think about it,” Mr. Lesnock explained.
The auction process also allows more transparency, according to Mr. Pchelintsev. Both buyers and sellers can follow the bids, either at a live auction or, increasingly, online.
“You get a notification on your phone. Someone just made a bid bigger than you, and you go, ‘how dare you?’” he said. “You go on and place a bigger bid and now you’re basically, apart from trying to get this amazing house, you’re also In sort of a little bit of a competition.”
That competition can help drive up the price of the property, according to Randy Haddaway, CEO and founder of Naples, Florida-based Elite Auctions.
“Sellers get more through this process than they would otherwise,” he said. “You get a group of millionaires competing against each other—and none of them are used to losing. They don’t want to walk away and that drives up prices.”
Mr. Lesnock agreed. “If you do [an auction] correctly, it will generate fair market or better prices.
Updated: Boston Real Estate Blog 2025
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Banker & Tradesman columnist Scott Van Voorhis raises the question: Will the auction strategy save Greater Boston’s once-booming luxury condo market? Here are excerpts from Banker & Tradesaman:
The overall pace of condo sales in downtown Boston slipped somewhat in 2009, from a paltry 1.2 sales a month to just one sale a month at 11 new projects tracked by PrimeTime.
But those developers that adopted an auction strategy had a very different result, with sales three or four times the typical pace.
In fact, if it weren’t for the sales generated by a series of condo auctions at the Bryant, which straddles the Back Bay and South End, and the South End’s 1850, the overall pace of downtown condo sales would have dropped a stunning 50 percent, PrimeTime’s Skahen notes.
….In Ford’s view, one of the problems of the auction strategy is that it can make a developer appear desperate.
“When I see an auction, I see it as a desperate move by the developers,” Ford said. “It might behoove some developers to just reduce the properties to the current marketing levels, than to desperately go to an auction format. I think buyers see the same thing.”
Will the auction strategy save Greater Boston’s once-booming luxury condo market?
The jury is still out on that one, but there’s mounting evidence that this seemingly desperate sales tactic is starting to yield some results.
Sales in the Boston area’s luxury condo market, after having ground to a halt in the dark days of last winter, are starting to pick up again at some projects.
And one of the main factors driving the increase is a shift by a growing number of developers to embrace the auction process, contend boosters.
Not everyone, though, is buying into the new tactics, with the developers of some of the area’s biggest new projects so far choosing to stay the course.
In fact, some counter that auctions are far from a cure-all, and traditional sales methods, combined with some timely price drops, can achieve the same results. Berkeley Investments is touting its recent success in selling condos in Boston’s Fort Point Channel neighborhood using more traditional sales tactics, and has even formed a marketing subsidiary to spread the new gospel.
But coming off a period in which sales of high-end condos fell off a cliff, it’s hard to argue against success, even if it has been a hard comedown for some developers from some bubble-year price expectations. For some, the argument can be likened to the age-old Band-Aid dilemma of a little pain at a time, or a lot all at once.
“Do you want to do it in one big shot, or go through the pain of having [multiple] price drops?” asks Thomas Skahen of marketing and research firm PrimeTime Properties, an auction fan himself.
Apparent Auction Success
So far, the numbers appear to back up the auction boosters, not the traditionalists.
The overall pace of condo sales in downtown Boston slipped somewhat in 2009, from a paltry 1.2 sales a month to just one sale a month at 11 new projects tracked by PrimeTime.
But those developers that adopted an auction strategy had a very different result, with sales three or four times the typical pace.
In fact, if it weren’t for the sales generated by a series of condo auctions at the Bryant, which straddles the Back Bay and South End, and the South End’s 1850, the overall pace of downtown condo sales would have dropped a stunning 50 percent, PrimeTime’s Skahen notes.
Thanks to a successful auction, the 1850 averaged more than three sales a month, while the Bryant recently sold 10 units at auction and another nine afterwards. Combined with previous sales, 30 of the new condo development’s 50 units are now sold out.
A similar story can be found in the suburbs at the Nouvelle at Natick, a new condo high-rise at the Natick Collection.
Once a laughing stock with just a few units sold, the Nouvelle is back in the game, with an auction in October kick starting a stalled sales campaign.
The downtown-style high-rise not far from Route 9 is now more than 50 percent sold, with 113 units in the hands of buyers, compared to just a handful a few months ago.
Desperate Times, Desperate Measures
The skeptics and traditionalists acknowledge the auction strategy’s success in moving units in a rough market. But they say the low selling prices condos are fetching at these auctions should give developers pause.
John Ford, head of Ford Realty brokerage, said the less than $700-per-square-foot that units at the Bryant fetched at auction was hardly impressive for super-luxury Boston units.
While prices of the flurry of Bryant condos sold in the weeks after the auction appear to have broken the $1,000-per-foot market, according to the developers, this still represents a significant discount for two-, three- and four-bedroom units that come with their own private elevators.
The pricing comedown has been even more dramatic at the Nouvelle. Dreams of selling units for well north of $1 million at the high-rise, which towers over the newly revamped and very upscale Natick Collection, are long gone. A penthouse unit that had been on the market for an eye-popping $1.7 million sold at the October auction for a pedestrian $626,000.
In Ford’s view, one of the problems of the auction strategy is that it can make a developer appear desperate.
“When I see an auction, I see it as a desperate move by the developers,” Ford said. “It might behoove some developers to just reduce the properties to the current marketing levels, than to desperately go to an auction format. I think buyers see the same thing.”
Opportunity Knocks
In fact, traditionalists like Ford may soon have their own dog to root for in this fight.
No fan of the auction process, Berkeley Investments completely revamped its marketing strategy in a bid to move units at its stylish new FP3 condo project in the Fort Point Channel area.
Berkeley dropped prices, with a number of units available for less than $500,000, while adopting a more targeted marketing strategy that featured winning over key brokers and holding events to highlight the project.
The 92-unit FP3 is now nearing the halfway mark in its sales campaign, having increased the pace to three closings a month.
In fact, Berkeley hopes now to help other local condo developers move units through this more patient, targeted approach, having launched a new venture called ResMark, notes Joe Laurano, the Berkeley executive in charge of the venture.
That’s all nice and fine with Paul Sunshine, president of New York-based Domineum, which recently helped launch the auction and marketing blitz that sold 19 units at the Bryant.
Sunshine contends things should get even slower for downtown Boston condo developers in the months ahead. After all, he argues, he just scooped up most of the available buyers.
“If a developer can wait it out, that’s a perfectly plausible strategy,” he said. “In the meantime, I am happy to take all the buyers.”
Last Updated: Boston Real Estate Blog 2025
