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Didn't miss the point at all.... OP stated "But now I am afraid the slew of underpriced homes are going to hurt our appraisal. Has anyone else seen this trend?" Appraisals are based on the sales price and have nothing to do with asking price what so ever. So you can ask $5 or 5 million and it makes no difference unless an actual sale happens, that is market value of that property, then the actual sales price is what is used to determine comps. Cash buyers can really reek havoc on a market because there is no appraisal needed and in a hot market over paying happens.
You really did miss the point. The OP said that the lower asking price, coupled with a quick sale, was leading to a lower sales price. They were asking if that lowered sales price would affect the market price, not the lower asking price directly.
In the end it's up top you to set the price. The only obstacle is if you price ridiculously high the RE agent should tell you he's not interested in listing it for you.
I agree. Know what you want to get out of it, then set the price accordingly. Of course, take the comps into consideration. I did just this, and added enough to allow for negotiation. I got exactly what I wanted to get.
We have a great realtor...she suggested an asking price which I thought was too low...she told me to get a certified appraisal done(my choice of appraiser) and if the estimate was closer to what I thought than what she did we would use my price and if the house sold within 10k of my price she would pay for the appraisal fee...well I took her up on it...and I was spot on and the house sold within the 10k of asking so she refunded me the $400 at closing...Oh I said have because we are using her again to sell our current house!!!
"A seller doesn't have to accept any offer they don't want to accept"....
I experienced this. Got a good offer for the Texas house while still in Michigan (couldn't carry 2 properties forever, so both were on the market) and didn't want to let it go as it was March and I felt the buyers in Michigan would be coming out around now since school would be out soon. So I declined the offer and took the house off the market. I still had to pay the RE their commission as they did their job and got the house sold. No regrets, no complaints from me, they did their job. But just a "warning" to others that they may still have to pay a commission. In my case it was $1,200.00.
You really did miss the point. The OP said that the lower asking price, coupled with a quick sale, was leading to a lower sales price. They were asking if that lowered sales price would affect the market price, not the lower asking price directly.
Yes, this was my question. The low starting prices were not my concern, just the rather low selling prices. There were two houses that sold close to my price (were on the market for about two weeks) so maybe that will help with my appraisal.
I don't get the "let's start a bidding war" routine. Seems to me that if buyers are disposed towards paying a bit more than the comps-based price, then they will simply add $$ to the non-reduced, comps based price if another buyer happens to show up. The "bidding war" approach just sounds like a way to get the seller to underprice the house at the outset so it sells fast; which as others here have observed, is usually more in the agents interest.
What happens if seller underprices to start a bidding war, seller gets an offer for the lowered full asking price, and it so happens that no one else bids? Does seller say "oops, never mind"?
It's a way to get more people in the door and thus create a sort of feeding frenzy. In truth, it probably only works in certain markets. For instance, I live in the San Francisco Bay Area, where something like 75% of homes end up in a bidding war. Most properties sell for 20-30% over asking and people understand that that's the way the game is played. So if a property is listed for about a $1m, people go in expecting to bid up to $1.3m. The more people in the bidding pool, the more pressure you feel to submit a strong offer.
But I just don't see that strategy working in a market where homes are below $400k. Someone who could pay $360k probably wouldn't be deterred by $375k if that's what it takes to get a home. To get people in the door, you only need to go a tad lower than comps. To be honest, in an area where all the homes basically follow the same specs, I'd be suspicious of one that was priced far below the others, wondering what could be wrong with it.
A fast sale is best for everyone. The homeowner (typically) is paying mortgage interest, taxes, insurance, etc. on a daily basis by owning the house. If I can get you the highest amount possible for your house, would you rather it take a weekend or 3 months to do it?
That's not really the point, though, is it? Of course everyone wants to sell quickly. Everyone also wants to sell for as much as possible. It's when those two are at odds that the different incentives for each party come into conflict. As a seller if I were told I could list for two more weeks and make an extra 4% (e.g. $20k on a $500k house, which, if the house isn't entirely paid off is an even larger percentage of the total cash returning to the owner), it would definitely be in my interest to wait. Conversely, if I were told I would have to do two extra weeks of work for 1.5% of that extra 4% (e.g. $300 on a $500k), it would probably not be in my interest to wait.
We have a great realtor...she suggested an asking price which I thought was too low...she told me to get a certified appraisal done(my choice of appraiser) and if the estimate was closer to what I thought than what she did we would use my price and if the house sold within 10k of my price she would pay for the appraisal fee...well I took her up on it...and I was spot on and the house sold within the 10k of asking so she refunded me the $400 at closing...Oh I said have because we are using her again to sell our current house!!!
She may be a great realtor, but your example doesn't demonstrate it. She made you get an appraiser before she let you set the price? And both you and the appraiser were closer to the actual price than she was? It seems pretty obvious that it's easier to sell something for less than it's worth than for slightly more than it's worth.
This isn't intended to be a knock on agents. It's simply looking at them as rational. Buyers should know that in most cases their interests are aligned with yours but in setting a price and selling quickly that's not always the case.
i would be careful under pricing unless you are comfortable selling at that number. If you get a full price offer you do not have to accept it, but if it is a full price cash with no contingency offer you may be on the hook to pay the realtors commission if you decline the offer.
That's not really the point, though, is it? Of course everyone wants to sell quickly. Everyone also wants to sell for as much as possible. It's when those two are at odds that the different incentives for each party come into conflict. As a seller if I were told I could list for two more weeks and make an extra 4% (e.g. $20k on a $500k house, which, if the house isn't entirely paid off is an even larger percentage of the total cash returning to the owner), it would definitely be in my interest to wait. Conversely, if I were told I would have to do two extra weeks of work for 1.5% of that extra 4% (e.g. $300 on a $500k), it would probably not be in my interest to wait.
That's an interesting study. Real estate agents when selling their own homes get 3.7% more and the home stays on the market 9 days longer than average. Sort of backs up my theory about underpricing.
"A seller doesn't have to accept any offer they don't want to accept"....
I experienced this. Got a good offer for the Texas house while still in Michigan (couldn't carry 2 properties forever, so both were on the market) and didn't want to let it go as it was March and I felt the buyers in Michigan would be coming out around now since school would be out soon. So I declined the offer and took the house off the market. I still had to pay the RE their commission as they did their job and got the house sold. No regrets, no complaints from me, they did their job. But just a "warning" to others that they may still have to pay a commission. In my case it was $1,200.00.
You wanted to pay the commission or you had to pay the commission? Always read your listing contract to determine what your responsibilities are under the agreement. Typically though, it's pretty easy to say something like . . .
-I don't like the closing date
-I'm not comfortable with a financing contingency
-I'm not comfortable with how much they are financing
. . . etc., etc., etc., and then you have not been presented with an offer that meets your needs and you are not responsible for a commission. I agree though that if you hire someone to do a job and they do it well then they should be paid. However, if an agent insists that they are owed a commission and your house did not sell then I would have an attorney review my listing contract if I were you.
Quote:
Originally Posted by WanderingFar
But I just don't see that strategy working in a market where homes are below $400k. Someone who could pay $360k probably wouldn't be deterred by $375k if that's what it takes to get a home. To get people in the door, you only need to go a tad lower than comps. To be honest, in an area where all the homes basically follow the same specs, I'd be suspicious of one that was priced far below the others, wondering what could be wrong with it.
It has nothing to do with price point. I've used the strategy quite effectively on homes priced at the level you mention. The only important thing is . . . how much demand is there in the market vs how many listings are available?
Quote:
Originally Posted by jayrandom
That's not really the point, though, is it? Of course everyone wants to sell quickly. Everyone also wants to sell for as much as possible. It's when those two are at odds that the different incentives for each party come into conflict. As a seller if I were told I could list for two more weeks and make an extra 4% (e.g. $20k on a $500k house, which, if the house isn't entirely paid off is an even larger percentage of the total cash returning to the owner), it would definitely be in my interest to wait. Conversely, if I were told I would have to do two extra weeks of work for 1.5% of that extra 4% (e.g. $300 on a $500k), it would probably not be in my interest to wait.
Do you honestly think most agents care about working for two weeks more to get a house sold? Take care of your clients and they will take care of you with referrals and return business. This is the same ridiculous argument people make in the threads about buyers agents. "Oh my buyers agent wanted me to pay too much because the more I pay for the house, the more money they make." Only the most ignorant of agents would be this short sighted and that attitude will be their downfall. So, you won't have to worry about them very long.
This being said, experience has taught me that the first offer is usually the best one. In slower markets, I've seen too many sellers turn down offers they thought were "low" and then wait months more to sell and they don't even end up sniffing that original number. The first mover is often the most motivated buyer.
Quote:
Originally Posted by jayrandom
She may be a great realtor, but your example doesn't demonstrate it. She made you get an appraiser before she let you set the price? And both you and the appraiser were closer to the actual price than she was? It seems pretty obvious that it's easier to sell something for less than it's worth than for slightly more than it's worth.
I was a little surprised too that this person was so excited about their agent. It's not always easy to price a property and sometimes we're wrong but I know when that happens to me it's usually not as well received.
Quote:
Originally Posted by jayrandom
This isn't intended to be a knock on agents. It's simply looking at them as rational. Buyers should know that in most cases their interests are aligned with yours but in setting a price and selling quickly that's not always the case.
The problem really is that you're looking at this all wrong. Any agent worth their license is not thinking of this as a single transaction which is what you are doing. They're looking at the next transaction and the transactions they'll have with your friends/relatives/neighbors. They're not going to get all those future transactions if they put their own interests ahead of their client's.
Quote:
Originally Posted by LifeIsGood01
i would be careful under pricing unless you are comfortable selling at that number. If you get a full price offer you do not have to accept it, but if it is a full price cash with no contingency offer you may be on the hook to pay the realtors commission if you decline the offer.
Again, read your contract and know what you are responsible for before signing it. If there is a clause in there that requires you to pay a commission even if the property doesn't sell and you're not comfortable with that, ask the agent to strike it from the agreement.
Also, there's no such thing as this "perfect" offer that you and others have imagined. There's always something to complain about and most listing contracts stipulate that the offer presented must be acceptable to the seller in order for a commission to be paid.
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