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I personally feel the listing agents tactic was unnecessary and shady for lack of better wording. The agent that showed me the property called yesterday afternoon and said it's looking like you'll need to bid at $XXXX but I don't know the number. I told them I didn't have another offer, it's hard to bid against unknowns, at least it is for me. YMV.
So if the asking price was $122,900, and you said recent comps were between $110k & $128k, I'm trying to understand how they priced it "to ensue a bidding war"? Sounds right in the middle to me but I don't know any specifics about the property.
From what you've said I also can't understand what role is being played by the agent who showed you the property, and if I were you I'd want to be crystal clear on that, rather than assume. Are they representing you, or working for the listing agent and therefore the seller?
I can only speak from my recent experience in a very hot market, as a seller's agent. It can be tough to price houses in a rising market. You can only look at past comps and I advise my clients to price it at what the comps dictate. But if there is a shortage in inventory, we can't control how the buyers will respond, and have to just roll with what happens, trying to maximize our clients' return and minimize their risk. Last 2 listings I had--20 & 27 offers respectively, and I didn't think I under-priced them or intentionally try to create a bidding war. I even consulted with other agents in my office on the prices. We don't have a lot of cookie-cutter properties here, though, so ithat makes it even tougher.
You have the right outlook on knowing what you're willing to pay and sticking with it. The right property will eventually show up, but it may not be as easy as you had hoped to find it.
Of course as a seller you want to net the most money, that goes without saying. However, if you're not a cash buyer, and possibly even if you are, I can't think of anyone who would willingly over pay for a property. Inciting a bidding war in a seller's market I feel is uncesary. This property would have sold regardless if it was listed at the current market value.. Creating a feeding frenzy was unnecessary and if more agents did or continue to do this, the market versus wage growth will not sustain and create a "bubble" in the housing market. The days of ninja loans are long gone, however, there are questionable loans already available.
I personally feel the listing agents tactic was unnecessary and shady for lack of better wording. The agent that showed me the property called yesterday afternoon and said it's looking like you'll need to bid at $XXXX but I don't know the number. I told them I didn't have another offer, it's hard to bid against unknowns, at least it is for me. YMV.
To clarify, the listing agent owns the brokerage firm, the agent that showed me the property works there. That is why I wrote in my original post " I assume there's no conflict of interest."
What does "over pay" even mean, though? An asking price is not an objective standard of what a home is worth, it's at best an educated guess. The actual value is what people are willing to pay for THAT house in THAT market at THAT particular time. If multiple people are willing to pay more than you want to pay, that doesn't mean they are over paying, it means you don't value the home as much as they do. Nothing shady about that.
Over paying to me means, buying something over it's value which is supported by recent sold comps, period. I wouldn't and will never be the buyer paying $10K over list, then in 2-3 year's the market tanks again and I'm underwater. I always buy with the intent to sell and make money, not lose money. It's worked thus far, and I'll continue to do the same. I can be patient, there will be another property.
What does "over pay" even mean, though? An asking price is not an objective standard of what a home is worth, it's at best an educated guess. The actual value is what people are willing to pay for THAT house in THAT market at THAT particular time. If multiple people are willing to pay more than you want to pay, that doesn't mean they are over paying, it means you don't value the home as much as they do. Nothing shady about that.
We have a winner! Couldn't have said it better myself.
the value is 110-128K
the asking price was $122,900
based on the condition you report, we can assume the value of this unit is < $128K.
you've increased your initial offer by $3,000
We don't know what your initial offer is. Without being specific, is your new offer above $123K, or not?
Can you agree that $122,900 is ~4% off FULL market value?
How is 4% underpriced a "low list price to incite a bidding war"?
If numerous of these condos sell, and crappy ones sell for $110K while glammed out ones sell for $128K....and this one was glammed out but asking just $110K .... then maybe you're establishing your case. otherwise, not.
And I'm perplexed how you've bought and sold 2 x in 5 years (and this must be the 3rd) but don't know whether the name you called off the sign that works at the same brokerage is a conflict of interest or not. Certainly, you signed some agency docs, which included dual agency.
Over paying to me means, buying something over it's value which is supported by recent sold comps, period. I wouldn't and will never be the buyer paying $10K over list, then in 2-3 year's the market tanks again and I'm underwater. I always buy with the intent to sell and make money, not lose money. It's worked thus far, and I'll continue to do the same. I can be patient, there will be another property.
If this 'reasoning' held true for all buyers, all the time, the market would/could not ever rise.
How can you ignore the effects of inflation?.. or changing demographics, or rising values of locations that support better jobs, hence higher RE prices, both rental and owned?
Simple. You can't.
So sometimes you gotta pay over asking to get what you want and can afford.
That's how most 'free' markets work.
(P.S. Of course it goes both ways, but you already know that!)
There is a risk, setting a low price to get bids. It may only get one full price cash offer as an example with no conditions that could be reason to back out of sale.
The seller may not accept the contract, but will in turn owe the agents the full commission for producing the purchase contract.
Over paying to me means, buying something over it's value which is supported by recent sold comps, period. I wouldn't and will never be the buyer paying $10K over list, then in 2-3 year's the market tanks again and I'm underwater. I always buy with the intent to sell and make money, not lose money. It's worked thus far, and I'll continue to do the same. I can be patient, there will be another property.
No one has a crystal ball as to future values - if you had "overpaid" $10k on a $70k house in Phoenix in 2011, you would likely have a $200k property today. Being "patient" in Phoenix in 2011 would have meant you would still be renting today, and would have missed out on massive appreciation. (And rents have went up substantially since then as well).
What does "over pay" even mean, though? An asking price is not an objective standard of what a home is worth, it's at best an educated guess. The actual value is what people are willing to pay for THAT house in THAT market at THAT particular time. If multiple people are willing to pay more than you want to pay, that doesn't mean they are over paying, it means you don't value the home as much as they do. Nothing shady about that.
What a house is worth is what a buyer is willing to pay.
Comps are a tool to use in figuring out what the average buyer is willing to pay for a similar house in that area and how much a bank is willing to loan.
But what a house is worth is what a buyer will pay, regardless of what the listing price is to start out with.
We "overpaid" for our home because we needed a home with a second garage. When we found the only one in our desired area, we paid extra for that. So for us, we bid what the going rate per sq ft was in the recent neighborhood comps for similar homes + what the second garage was worth to us. In terms of what the seller wanted, we bid low, but in terms of what the market comps said, we bid high. In terms of what we needed (wanted), it worked out just right.
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