The Secret Behind Auctions (And Why You Should Care)

I’ve been in this world for years - whether it’s luxury or non-luxury real estate auctions, Christie's, Bonhams, Sotheby’s for art and rare luxury items, or high-end car auctions -  even the early days of eBay, where I was flipping antiques and rare finds. I’ve studied the psychology of auctions - how competition, scarcity, and social proof create a frenzy that drives prices higher than logic ever could.

And real estate? It’s no different.

I’ve seen firsthand how a well-executed bidding war can turn a home into an event. And in a city like LA, where people don’t just want a home but openly compete for status and exclusivity, the psychology cannot be ignored.

The Real Estate “Auction” No One Calls an Auction

In the U.S., the word auction and real estate in the same sentence tends to raise eyebrows. People assume it means a distressed sale or that there’s some kind of catch. But here’s the truth: it’s happening every single day, right under your nose.

If you think auctions are only for bank-owned properties or desperate sellers - think again.

Remember The One - the absurdly massive Bel-Air mansion that was originally priced at $500 million? It didn’t sell at first. It sat on the market. Eventually my team headed by Aaron Kirman auctioned it off for $126 million to the owner of Fashion Nova. A $374 million price cut from the developers expectations.

Meanwhile, in Australia, live real estate auctions happen in the front yard everyday. 

But here’s the thing: half of all real estate sales in LA already function like an auction. 

We just don’t call it that.

• A home is listed at a sharp price (often lower than what it’s worth).

• Buyers rush in, offers (or bids) stack up.

• The listing agent counters everyone: “Best and final, please.”

• Buyers scramble, outbidding themselves in the process.

• The highest number wins.

The Biggest Pricing Mistake Sellers Make

The key to a bidding war? Start low. Sell high.

This is where most sellers screw up. They think: Let’s price high and leave room to negotiate.

That’s not how human psychology - or auctions - work.

At Christie's, they didn’t slap a price tag on Salvator Mundi and hope for the best. They estimated its value as $100m but they started low, let the competition build, and let the momentum - and the fear of missing out - push the final price into the stratosphere - a whopping $450m. 

The opposite strategy? Overpricing.

• You start high.

• No one bites.

• You lower the price.

• Still no one bites.

• Eventually, you’re forced to slash it again.

That’s called a Dutch auction. And if you’ve never heard of it, that’s because it doesn’t work.

How This Plays Out in Today’s Market

Right now, demand is outpacing supply. One home we just sold received as many as 31 offers.

That’s not normal. But it tells you something: underpricing is safer than overpricing.

There is no “market price” for a home - just a range. My job is to make the market, to be the conductor over your masterpiece of a home - the symphony.

And a well-run bidding war? That’s the crescendo.

Buyers: The only time you’re not in an auction is when you’re the only offer. Otherwise, assume you’re bidding against the crowd.

Sellers: Your best bet is to create an auction environment, even if it’s not technically called one.

And if you’re a seller working with an agent who doesn’t know how to run this process properly, you’ll never even know how much money you left on the table.