Personal Money · Thursday, 27 August 2026

01 · Briefing · what happened

The winner's curse: why winning a bidding war usually means having judged the price worst

Personal Money 1 min 31 sources

Nobody knows what a house is really worth. The auction hands it to whoever guessed highest, which is the same as whoever was furthest off.

8.2%

average overpayment by bidding-war winners

over a typical 6.3-year hold, across 14 million US sales [2]

1.9 pts

extra chance of mortgage default

for buyers who paid above the asking price [2]

14x

guide price paid for one Dales house

£19,000 guide, £263,000 hammer, after 123 bids [6]

62%

US buyers who paid below list

the highest share since 2019, on last year's sales [8]

At a glance

A study of nearly 14 million US home sales found buyers who paid above the asking price earned about 1.3 percentage points less each year. [2]
Held for the typical 6.3 years, that gap works out at roughly an 8.2% overpayment. [2]
Bidding-war winners were also 1.9 percentage points more likely to default on the mortgage. [2]
They resold faster than other buyers, which suggests the extra money bought auction fever rather than a house they loved. [2]
The cause is arithmetic, not foolishness: everyone guesses, the highest guess wins, so the winner is whoever overestimated most. [1]
An auction sells to the highest bid, whether the bidding is open in a room or sealed in envelopes. [26]
Three engineers at an oil company named it, after noticing the drilling plots they won held less oil than expected. [1][3]
Richard Thaler collected it in a 1992 book of economic oddities, and published a new edition with Alex Imas last November. [3][4][5]
It runs well beyond auction rooms - house bidding wars, company takeovers and clubs chasing young players all have the same shape. [3]
A four-bedroom Yorkshire Dales house guided at £19,000 drew 123 bids and sold for £263,000. [6]
Its buyer inherited a 1996 planning condition requiring an occupant to work at the local pub, which closed in 2025. [6]
The effect is uneven: the study found lower-income, Black and Hispanic buyers are more likely to overpay in a bidding war. [2]
San Francisco is the exception, with single-family prices up about 17% in a year to a $2.2m median while supply fell roughly 45%. [7]
Most of the US market runs the other way - about 62% of buyers paid below the original list price last year, the highest share since 2019. [8]
In June about 18.8% of American listings carried a price cut, and the median asking price was down 2.5% on a year earlier. [10]
Nashville shows the swing: a median listing price of $453,000 in early 2022, a $590,000 peak in July 2023, then $529,000 by March 2026. [28]
Zoopla put the average UK home about £16,000 below its listing price last November, with price growth down to 1.3% a year. [17]
Sellers are warned about the mirror risk - price too high and the home sits, price too low and money is left on the table. [27]
What tips a market toward buyers is simply more homes than buyers, which shows up as longer selling times and price competition. [29]
Australia sells homes by open outcry auction, and Victoria will soon force sellers to publish their reserve price seven days ahead. [11]

Forces in play

Fear of missing out Building↓

a crowd signals demand, and the signal pushes bids past value [11]

Buyer bargaining power Building↑

18.8% of US listings carried a price cut in June [10]

The information gap High↓

most Australian sellers need not reveal a reserve price [11]

Faith in the auction Easing↓

Australian auction listings fell about 20% in a year [13]

In play Steve Choi and colleagues — measured the curse in housing for the first time, across 14 million sales [2] Richard Thaler and Alex Imas — named the pattern in 1992 and republished it in late 2025 [4][5] Three Atlantic Richfield engineers — spotted it first in Gulf of Mexico drilling bids [1] Victoria's state government — will force sellers to publish reserve prices before auction [11]

How it unfolded

The oil fields engineers notice the drilling plots they win hold less oil than expected [1][3]
1992 Thaler collects the anomaly in a book called The Winner's Curse [4][5]
2017 Thaler wins the Nobel memorial prize in economics [4]
Late 2025 Thaler and Alex Imas publish a new edition of the 1992 book [3][5]
This year the first large-scale housing evidence for the curse arrives [2]
Next year Victoria's reserve-price law goes to state parliament [11]

Where this points

Watch whether published reserve prices calm the bidding in Victoria or simply move the anchor upward - the same reform could plausibly do either. [11]

Also today

9 more stories on this beat.

England and Wales move to binding sales

Ministers propose making an accepted offer legally binding much earlier, with a financial penalty for pulling out without good reason. Scotland already works this way. [14]

Why it matters — Gazumped buyers currently have no legal recourse, and Rightmove says more than one in five sales fall through.
Stamp duty may move to the seller

The UK government is said to be weighing a shift so the tax falls on sellers and only above a threshold, hitting London and the south-east hardest. [16]

Why it matters — One study found a two-point rise cut how often people move by 37%, which is a tax on the wrong thing.
Australia's auction habit is shrinking

Total listings rose 22.8% over twelve months while auction listings fell about 20%, and roughly 40% of listed homes now sell before the auction happens. [13][31]

Why it matters — Thirteen years of data show a home that fails at auction later sells about 1.3% below what a private sale would have made. [12]
Victoria will make sellers publish the reserve

Agents must disclose the seller's genuine reserve price at least seven days before an auction, under laws going to state parliament next year. [11]

Why it matters — It targets underquoting - advertising below the expected price to build a crowd - already illegal but hard to police while reserves stay private.
Nearly £5.9bn of UK property sold under the hammer

Auction sales rose from £5.5bn in 2024 to almost £5.9bn in 2025, and England and Wales recorded 14,025 mortgage repossession orders in 2024. [15]

Why it matters — One lot in a London room carried a guide price of £1, and one seller was in the room, still living in the house.
A card settlement breaks the all-cards rule

A settlement between Visa, Mastercard and US merchants ends the rule forcing a shop that takes one Visa credit card to take every Visa credit card. [18]

Why it matters — It opens tiered pricing at the till, the promised fee cuts run out after five years, and the fee itself is roughly 1% to 3%. [19][20][21]
A 13-month clock decides who gets scam money back

UK rules from October 2024 promise repayment within five working days up to £85,000, but the bank must be told within thirteen months of the last payment. [22]

Why it matters — One woman paid £19,000 in October 2024 and only realised in March 2026; Lloyds refunded in full a day after BBC Money Box asked.
Banks wrongly refused a third of fraud complaints

The ombudsman judged Monzo wrong in 34% of 3,372 cases, NatWest in 33% of 1,972 and HSBC in 32% of 2,535. [23]

Why it matters — Industry figures counted 185,733 tricked-transfer cases in 2024, with £450.7m taken and £267.1m repaid.
Owning a home costs nearly as much as buying it

Typical American non-mortgage home costs reached $24,529 a year, up from $17,958, against the $26,508 a year spent on the mortgage itself. [24]

Why it matters — Closing costs add a national average of $4,661, about 1.6% of the average sale price, and only 37% know a 20% deposit is not required. [30][25]

02 · Lesson · why it matters

The prize goes to whoever was most wrong

When nobody can value a thing, an auction does not find its true price - it finds the largest overestimate in the room.

How it works

Nobody knows what the thing is really worth
Each bidder guesses, and every guess is a little off
The rule of the auction hands it to the highest guess
So the winner is whoever overestimated by the most
Add bidders and the top guess climbs further from the truth

The twist

Winning is not proof of good judgement - it is evidence against it, because the room hands the thing to whoever was furthest out.

Where you've seen this

Hiring

the firm that outbids every rival for a star has valued them above everyone who looked

Building contracts

the cheapest tender often belongs to the firm that most underestimated the job

Company takeovers

the buyer who beats all comers holds, by definition, the most hopeful forecast

Sports drafts

clubs compete for a young player nobody can measure yet, and the keenest club pays

The catch

It only bites where the value is uncertain and roughly the same for everybody. If a thing is genuinely worth more to one buyer than to any other, paying most can be right.

And the whole of it

Every bidder in that room was careful, and the room still produced a price nobody thought sensible. A seat in that room shows one number - its own - which is why a room can be wrong while everyone in it is reasonable.

03 · Lab · your turn

The Room

Rehearse a sealed-bid auction and feel winning become evidence that the number was too high.

04 · Truth · what's really going on

Stripped of the framing

An auction is sold as a way of finding a thing's true price, but where the value is unknown it mostly finds the largest error in the room.

Why it lands — Winning arrives instantly and feels like judgement rewarded, while the price is only tested years later, when the house is sold again.

Claimed

What people said. Not yet a fact.

Sellers and agents, commonly

An auction gets a higher price than a private sale. [12]

The researchers who measured thirteen years of it say the premium is more modest than usually conveyed, and that the main gain is convenience for the agent. [12]
Real estate agents in Victoria

A published price guide is enough disclosure before an auction. [11]

The state disagrees: from next year the seller's genuine reserve must be published seven days ahead. [11]
The UK housing department

Binding contracts will save people time and money and give them certainty. [14]

The Law Society says consistent upfront information has to come first, and that estate agents need consistent regulation too. [14]
UK Finance, which speaks for banks

Only a small number of scam cases fall outside the 13-month reporting deadline, and victims can go to the ombudsman. [22]

National Trading Standards says the rule needs reviewing, reforming or removing. [22]

Verified

What we could actually stand behind.

Buyers who paid above asking earned about 1.3 percentage points less a year, roughly 8.2% over a 6.3-year hold. [2]

How we checked — A study of nearly 14 million sales across 30 US states, described by one of its own authors with the working paper linked.
The term was coined by three engineers at an oil company watching Gulf of Mexico drilling bids. [1][3]

How we checked — Two independent accounts, one of them Thaler recounting the origin himself.
A Yorkshire Dales house with a £19,000 guide sold for £263,000 after 123 bids. [6]

How we checked — Confirmed by the auction house, and set beside a local valuer's estimate for comparable homes in the area.
UK industry figures counted 185,733 tricked-transfer cases in 2024, £450.7m taken and £267.1m repaid. [23]

How we checked — The banking industry's own annual count, published with the compensation figure beside it.

Nobody knows

Open questions — ours included.

How many US buyers actually paid under the price last year.

Two figures circulate for the same period: 62% below the original listing price, and 60% below asking. They are not the same measure. [8][9]
Whether the winner's curse works the same way outside the United States.

The 14-million-sale study covers US housing only, and its author says other countries remain an open question. [2]
Whether publishing reserve prices will cool bidding or raise it.

The same analysis says clearer signals could temper emotional bidding, or anchor buyers higher if sellers respond with bolder reserves. [11]
How many scam claims die on the 13-month deadline.

The banks' trade body says the number is small but publishes no figure, and the clock runs from the payment rather than the discovery. [22]

Who gains

Sellers in a bidding war — The overpayment is money that moves straight from the winning buyer to them. [2]
Estate agents running auction campaigns — An auction removes the back-and-forth of private negotiation, which the researchers name as its main practical advantage. [12]
Card-issuing banks — A fee of roughly 1% to 3% on every card sale funds the rewards offered to the same shoppers. [21]
Buyers of repossessed stock — Nearly £5.9bn of property reached UK auction rooms in 2025, some of it guided at a few thousand pounds. [15]

Who pays

Lower-income, Black and Hispanic buyers — The study found they are more likely to overpay in a bidding war, and so more exposed to weak returns and default. [2]
The woman whose home sold while she stood in the room — Three hundred lots went through one London sale, hers among them, and the gavel did not pause for her. [15]
Shoppers who pay cash — The swipe fee is charged to the shop, never printed on the receipt, and can reach the shelf price everyone meets. [21]
Scam victims who realise late — A £19,000 payment made in October 2024 was refused because the loss was only noticed in March 2026. [22]

05 · Hope · carry this

For thirty years the winner's curse was mostly a story economists told each other. Now fourteen million sales have measured it, which is how a hunch becomes something anyone can be warned about.