SOLD A HOUSE IN 3 DAYS, 10% ABOVE ASKING PRICE, WITH 20 OFFERS!!
Catchy? Wouldn’t you like to hire a Realtor’s service with above credentials?
As most of us in the real estate market know: Inventory is low and demand is high. This is especially true for lower priced homes in sought after areas.
Investors: Quite some real estate investors made good money during the recent housing bubble burst. This new wealth attracted scores of people with monetary savings to become real-estate investors. Instead of the conventional ‘hold and rent property’, they decided to flip’em for quicker gains. While there is nothing wrong in that, the influx of new investors has aggravated demand in an already limited supply of starter homes.
Create Bidding Wars (Seller side):
Have you ever attended any auction and believed the winning bid was way too high for the value? Now imagine if these bids were to be ‘played blind’!
A bidding war basic is to: Price low to sell high.
Realtors are increasingly making use of this ‘economics law’ of demand and supply and the auction mentality to their advantage. The concept is not new. It’s again gaining moment given the market situation. In fact, it is becoming the new normal.
Properties are being priced at the lower end of the comparables- to garner interest and a bidding war. A deadline is set for highest and best offers. There is no indication of what offers are pouring in. Imagine you are the Buyer. You are playing a ‘blind game’! You come up with an inflated price to beat other hopefuls. A house listed at ‘$ 299,000’ just sold for ‘340,000!!!’ Congrats……. But was it worth it????? Depends..
And which Seller will not prefer cash over mortgage UNLESS the financed offer is reasonably higher than cash? Thus, Buyers who will finance their home have to bid even higher to have their offers considered.
I have seen lot of such deals fall through. One reason is: Properties do not get appraised at the inflated price. Cash buyers are something else. They too get cold feet wondering if the property is actually worth the price they bid!
Is this good business practice? While many serious Buyers stand to lose in the game, if done correctly, it ‘could’ benefit the Seller and ‘definitely’ benefit the Seller Agent Resume.
Friend and Foe (Seller side)
Have you come across a sale where the Agent looks accommodating and shows lot of eagerness to work the deal, but every Buyer request is vetoed by the Seller and countered again?
Sometimes, all of that is genuine. All people are unique, and so are their temperaments. Some Sellers cannot digest the fact that anything could be wrong with their house. They feel any Buyer requests for corrections/credit are to nickel and dime them. And hence the defensive approach.
Other times, it could be a strategy! Playing the Good cop, bad cop… While the Seller plays the bad cop, his/her Realtor acts supportive and understanding. The buyer may feel as though someone is on his or her side, that he or she is making progress, and giving up will not be an option when they have come so far.
Justify a fake lower price (Buyer side)
It happened on 2 different properties that I had listed (notably during winter months when traffic is not very high). In my case, I encountered the same Realtor both the times. After a listing crosses the 30 day mark (or a price reduction), Realtor calls stating the Property is overpriced and that they have Buyers for a lower price. If the listing agent gets convinced and wants to unload the property, he/she may buy into the justified fake lower price.
Both times, I had done my research thoroughly and I knew what the property was really worth. I educated my Seller clients and left the decision to them. Thankfully, both times, my clients believed in me and my judgement and we closed with offers considerably higher than what was offered under this strategy.
Have I ever low-balled offers on behalf of my clients? Yes, as a Realtor, we are required to present offers our clients deem fit. Have I consistently called Realtors trying to convince them they are overpricing their homes? No
Is this a good business practice? Sometimes, properties are truly overpriced. While other times, Realtors are just trying to test the waters. I personally, would use double caution when working with such Realtors.
Nibbling (Buyers side)
Make a high offer and then find irrelevant issues to ask for credits (Buyer side)
To stay competitive in their offers, some buyers make high offers; and then find irrelevant issues to ask for credits.
A Funny bone from one of my previous blogs: “Home Inspection reveals doorbell doesn’t work! Better ask for all new wiring, new furnace, water softner and a Jacuzzi tub”
Essence is: Buyer nibbles a bite here and a bite there — slowly getting everything they desire from the seller.
Realtors have experienced this more often than not. This strategy is self-explanatory
It is imperative for Sellers to stand their ground, be confident and willing to walk away if need be. Of course, all in all, in depends on the Sellers urgency to sell.
Conclusion:These are merely some of strategies Realtors are using today. If you have come across other tactics, please feel free to share them.