It wouldn’t exactly be going out on a limb to predict that 2016 Pacific #203 will end up selling for “over asking!” Especially considering the note we recently received from a plugged-in (and frustrated) reader in the hunt.
[I’m] writing to vent about 2016 Pacific #203…I heard about it before it went on the market and asked my agent to do some digging because I thought there might be potential to purchase before it was listed.
2 bedroom, 2.5 baths, 2 story, no view, one car parking.
They listed for $1.295M (first open was 1/6) but they’d already gotten a pre-emptive offer at $1.35M before it was listed, which they turned down. As a buyer, it is incredibly frustrating when agents don’t price properties at market but rather below-market. Seems to me that the reason is either 1) they want to hit a segment of buyers who might draw their limit at below $1.3M in hopes of enticing them to generate multiple-bid situations; and 2) be able to say that the price sold ‘OVER ASKING.’ I know many of my friends share the same sentiment and frustration as me… ‘over asking’ is b.s….
Huh. Perhaps we’re not the only ones who understand that “over asking” is currently more indicative of pricing strategy than anything else. And as an aside, we can’t fault either side for their frustration or approach.
UPDATE: 2016 Pacific Avenue #203 closed escrow on 1/25/08 with a contract price of $1,375,000 (6.2% over asking).
∙ Listing: 2016 Pacific Avenue #203 (2/2.5) – $1,295,000 [MLS]
I have no sympathy for this buyer (or any buyer) who loses out on a bidding war. It is what it is.. and what it is is a good pricing strategy apparently.
Yes, they are trying to draw in those who are looking in the 1.3M range and below. Good point and good strategy. For a desirable property this is still working.
But no, I doubt they could give a damn whether it sells over asking just so they can say it did. Seriously. The buyer just wants maximum dollar, obviously, and for this type of property a low asking price to create the excitement and bidding war is the right thing to do.
And yes I have lost out on bidding wars before FYI. Sucks, but I am not gonna go around crying about it. Move on to the next one…
My strongly-held personal opinion is that it is unethical to list a property for any price which you would not accept under reasonable terms. Not only would I never use this “sales technique”, I would never use an agent or broker who I know to have engaged in it. Anyone engaging in this tactic is dishonest, in my view, and not someone I would do business with.
I think there ought to be a law making this whole tactic illegal.
I can find limited value in underpricing a property to generate interest, and stating up front that you are going to hold offers and review them after a week or two. Obviously, if you get multiple offers, you can choose the most favorable one. But if the only offer(s) you get are at or around your asking price, I personally think you should be obligated to accept the offer, so long as the other terms are reasonable. In other words, if you want to play the game of underpricing your property, you should be prepared to take the risk that you’ll have to sell it at that undervalued price, if the feeding frenzy you’re hoping for fails to materialize.
The whole practice is sleazy, and I’d apply the same term to anyone who engages in it. How is it different than operating a retail store where you refuse to sell your merchandise at the prices which you advertise? It borders on fraud (yes, I do feel strongly about this, lol…)
A seller should be able to LIST a home for whatever they want. buying a home in America is by a bidding process, similar to Ebay. If I sell something on Ebay (or Sotheby’s or Christie’s) I might START the bidding at $X… but I certainly anticipate it to be bid higher than that.
The list price is only the starting bid price. And I’m all for someone’s RIGHT to start the bidding low, so long as there is a duration limit to how long they will accept offers (for example, accept offers for a week, not a month or year or something).
In the story above, the 1.35M offer was given BEFORE the home was on the market. I see no reason why a seller is obligated to sell a home before they put it on the market.
Once they rejected that offer (on a property not for sale), then they still need to list their property to get people to come and see said property.
The sellers are taking some risk here. The pre-emptive offer may be the highest offer they’ll get. They don’t KNOW they’ll get a higher offer (they think they will, but nothing is for certain).
I would feel differently if the sellers placed the home on the market for 1.295M, got an offer for 1.35M, and rejected it with no other offers.
The whole practice is sleazy
yep, the WHOLE process is broken here… but way more than just listing low… what about taking off and RELISTING a property making changing the DOM and making it “new listing”, phantom of fictitious multiple bidders, agent conflicts of interests, divergence of properties for sale and the MLS, no good ‘public’ MLS and the list goes on and on.
The whole process should be more open.
Why should someone feel entitled to buy a place before the market sets a price? Pricing is inexact; in today’s market bids come in both above or below the asking price. In this case, only 4.6% over asking isn’t particularly preemptive – if they really wanted the property I hope they submitted that bid once it was listed, and if they really wanted to preempt they should have offered more.
dave, you can use whatever selling tactics you want when YOU sell YOUR property. realestate pricing is not an exact science; buyers and sellers are free to use their discretion.
your suggestion seems to be that sellers must accept the list price, or lower….which seems to benefit only the buyer. free markets are hard, price control is worse.
I’ve taken a look at the photos – doesn’t look so attractive to me! I hereby bid $895,000 . . .
John,
You should be careful of what you post and email.
Pursuant to UETA and E-Sign, your post along with parole evidence may / can form a binding and enforceable contract for the sale of real property in satisfaction of the writing and subscription requirements of the statute of frauds.
You never know if there are any unethical people / pro per attorneys reading your posts / emails.
Paul
I too was annoyed by sellers not willing to accept a reasonable offer at asking. Then I realized that homes in SF are sold by auction in hot markets. Once you accept that, the aggravation goes away.
Its really hard to blame the seller for trying to get the highest price for what is probably the most valuable asset that they own.
Its a game and the sellers are trying to maximize their profits. “Caveat Emptor” should be in the back of the mind of anyone trying to buy a trinket in a Middle Eastern bazaar, a used car, or a San Francisco home.
Does anyone know whether the Zillow “Make me move” listings require the owner to sell if a buyer presents an offer ?
Of course, the listing is an invitation for the buyer to make an offer. It is not an offer by the homeowner. Contract=Offer (communicated to seller)+ acceptance (communicated to buyer). Statute of frauds = offer and acceptance for real property must be in writing.
Interesting topic. And it seems to me, in total it is a lament that the world doesn’t allow them to purchase choice properties *below* market. In a true auction, there’s the concept known as the winner’s curse. Check out: http://tinyurl.com/hehfg .
The unhappy buyers and their sympathizers base their complaint on some questionable premises.
1. “I thought there might be potential to purchase before it was listed.” Could it be that this buyer is “frustrated” because this seller wasn’t willing to put themselves in a situation where they might unknowingly sell their property for less than market? If you don’t put it out to “market” that’s the risk you take as a seller.
2. “it is incredibly frustrating when agents don’t price properties at market.” I believe “market” to be broadly over-used and misunderstood term. Does anyone have a “market” calculator? I don’t think so. The “market” is a complex function of supply and demand, that varies (sometimes sharply) over time. The only “market” is when a specific asset is offered for sale and real people commit real resources to complete a transaction.
3. “you should be prepared to take the risk that you’ll have to sell it at that undervalued price,” That would make sense if the opposite were not true, that in CA real estate transactions, buyers generally have any number of convenience contingencies with which to exit their purchase agreement unscathed. Unless that changes, your proposed (and in some ways justified) seller integrity rule isn’t fair. Welcome to the NBA and the gamesmanship that these imperfect rules create.
So, stop complaining, figure out your budget, and start playing the game. If you can’t get your brain wrapped around the rules, don’t play, invest in stocks and go rent something.
I agree with Dave. Sellers and seller agents who manipulate the market in this way are beneath contempt and should be shunned. As a buyer, the appropriate response when faced with an unethical seller and seller’s agent is simply to stand aside and refuse to be manipulated in this way.
okay dave and mark,
you say you think there ought to be a law that would prohibit this tactic. walk us thru how that would work.
“buying a home in America is by a bidding process”
NO IT IS NOT! Have any of you ever lived any place outside of San Francisco? I’m starting to think not. All I can envision when I read this crap some of you spew are Stepford wives with glassy, hypnotized eyes! In 99% of markets, an appraiser comes over to appraise the house, the agent lists the property at that VALUE, and buyers may try to get a few thousand $ off that price, but they trust that the price is the value! If you want to consider that process “bidding”, then it is actually a game to ask as LOW as you can, not as HIGH! Sellers (and I’m starting to think EVERYONE) in SF are just greedy. Open up your eyes.
Pricing a house is an inexact science with so many subjective factors involved. So, in general, I don’t have any issue with a seller not accepting an offer at asking. Until a property is put on the market, there really isn’t a good way to determine the exact level of price interest a property will receive.
Having said that, I think this situation is a little different in that the sellers, prior to listing, have already turned down an offer $40k over their (now) list price. So these sellers _do_ have a reasonable belief that their property is worth more than their list price, but are still listing at that price. Not sure I feel particularly strongly about it, but it doesn’t feel quite “right” to me.
When buying a property I want to purchase it for the absolute minimum I can. When selling a property I want to get the absolute maximum I can. This is not complicated.
I could choose to move to Modesto where I could probably get a property for under asking. I choose not to.
I too have felt frustrated at being out bid. I have also rejoiced at recieveing much more money than I expected on a property sale.
I have used a number of tactics as both a buyer and a seller to achieve my desired outcome (all of them legal and ethical). I look forward to doing so again soon.
Paco: Thanks for the invitation.
I believe we already have consumer protection (e.g., anti-bait-and-switch laws) in most other consumer markets – for instance, I also believe that consumer protection laws extend to prohibiting the participation of shill bidders in most auction settings.
With respect to the housing market, other posters above are correct that the courts have ruled that asking prices are “invitations to negotiate” and are not true offering prices that could then be accepted by a buyer, thus forming a binding sales contract. Perhaps one way to end this practice would be as a matter of public policy. In other words, perhaps contract law could be changed legislatively such that the asking price becomes a true and genuine offering price, such that, if a buyer accepts the price at which a property is offered, then a binding sales contract had been formed (subject of course to the other non-price terms and conditions). However, I’m realistic enough to know that such a proposal would likely never be adopted by any state legislature. The real estate industry in the US has sufficient lobbying power to block such a measure.
My prior e-mail was more of a practical suggestion of what to do when confronted with the situation of sellers and seller agents who engage in a deliberate practice of knowingly underpricing a property to manipulate buyers and to create a bidding frenzy. My personal view is that such sellers and seller agents are beneath contempt and should be shunned. When, as a buyer, you are dealing with such a seller and unethical seller’s agent (and you’re in a situation in which the law does not help you), my response as a buyer, and I would argue, the appropriate response for all buyers, is to shun them and have nothing to do with such a seller or seller’s agent.
Would you buy a car from a dealer that plays a consistent bait-and-switch game? Maybe some would, but I would not. And I would go further: I would never set foot on that dealer’s car lot again. It’s only in this way (when the law doesn’t or cannot help you) that the ethical participants in the market can drive the unethical participants out of the market.
So shun them, refuse to bid or do business with them, and remember them enough to never set foot on that car lot or deal with that real estate agent again. If enough market participants did this, they would be driven from the market and/or realize that it is not to their advantage to engage in these practices.
Paul Hwang,
LOL…nice try. It’s called “parol” evidence, unless you somehow think the property is (literally) a prison. 😉
To expand a bit on what I was saying: I believe that if you list a property for $X and a buyer comes along and offers $X, with a reasonable closing period, a cash deal or financing pre-approval, and no contingencies beyond perhaps a professional inspection, a seller should be obligated–ethically, if not legally–to sell. (Obviously, in the case of multiple offers, the seller could accept the most favorable.)
Mark D. got it exactly right, and said just what I was trying to say.
Having bought and owned property in several areas of the country, I can tell you that the Ebay-like auctions that many engage in here in the Bay Area are NOT the norm in the rest of the country, not even close. And while a great property may sometimes inspire a bidding war under favorable market conditions, I believe the practice of intentionally listing a property at a price you have no intention of honoring is fraudulent and unethical.
The only recourse we have is to vote with our feet, and walk away from those who participate in this scam. I, for one, have a long memory for agents who use this tactic, and I hope there are lots of others like me out there.
mark, down south they often advertise “sellers will entertain offers between $x and $x” which i believe is in response to your concerns. maybe its just a matter of semantics really. what if brokers stated “sellers will accept the highest bid” and then offerred a “suggested minimum price”? would that work for you?
this really sounds like buyers wanting it to be acceptable to underbid but not overbid. as to the bait ‘n switch i agree if its apples or toyotas (easily replicated) but light and view and smell and feel are difficult to quantify- much less replicate. not to mention the problem you would have if ten buyers all said “i’ll take it”. this is common (ten overbids for one choice property).
what would you do then? have people camping out on the sidewalk waiting for the ticket window/open house to open?
rg- lolol! appraisals are primarily based on available comps and
that is faulty for many reasons. for instance, there are views and
VIEWS, light and bright sq.ft prices and dark and damp sq.ft. prices…as to the comment about being greedy, well, you can sell your house for less than what the market will bear if that makes you feel better…
The above (several posts back) proprosal would simply lead to everyone listing their property at grossly over-inflated prices. If a seller was obligated to accept the first offer at asking price, there would be no way for them to get the true value of the property if they mistakenly underpriced their property. So you would have sellers asking for double what their property was worth knowing that they could then accept the highest offer, not be obligated to accept the first offer at asking.
I do think it is kind of cheesy though for the sellers here to set an asking price under what someone has already offered them.
dave, i agree that it is unethical to list at a price that you have no intention of honoring-but you cannot know that the seller has that intention. in fact, b/c it is so important to not overprice in this market you are wise as a seller to list for a bit under what you want to get with the hope that the market will tell you what the property is worth. i have employed this tactic b/c i would never want to be seen as a desparate seller (who is just asking to get lowballed). it is far far better as a seller to have a few choices (even if they are below your price) than it is to second guess yourself worrying that you’ve overpriced. do you cave in? do you wait?? aghhhh! its stressful for sure. if in fact the only bids that came in were at or below asking i, personally, would feel that the market has spoken and would hit the bid. but that’s just me.
by the same token i like to list my rental properties a little bit below market so as to have the benefit of choosing among many candidates. i do not find that unethical and its worked very well for me over the years.
Rg, your mistaken. Ultimately the seller determines how they want to price their house. Any appraisal performed may be used as guidance by the seller or completely disregarded. In other words, appraisal, value and pricing are not necessarily aligned. And besides, in most cases an appraisal is performed not for the buyer or seller but rather for the bank who is providing the financing.
“buying a home in America is by a bidding process”
NO IT IS NOT! Have any of you ever lived any place outside of San Francisco?
I don’t live in San Francisco, and I don’t even live in California. I can tell you with experience that all of the big growing metro areas in the Midwest also are by highest bidder.
I was outbid on several properties (by substantial amounts) when I last bought in the midwest. I finally bought my home BEFORE it went on the market.
I have been involved in purchases in RURAL areas as well (family members etc) and they were also all by bidding process.
During the height of the RE frenzy, I watched bidding wars in many areas including my close friends in LA, San Diego, Orange and Riverside County, Portland, Seattle, Minneapolis, Chicago, Ft. Lauderdale, Miami, Atlanta, DC, Boston, NYC, Charlotte, and the list goes on and on. (these are the areas where my friends have all relocated)
You are confused, buying a house is ALWAYS by bidding process. Sometimes the bids simply don’t reach the asking price, but it is a bid nonetheless.
I’d like you to name a single market where there is no bidding process. The only ones I can think of are Ohio, Detroit, and the Texas metro areas (areas where there is either economic recession, or long history of ever expanding buildable land). and bidding occurs even in those markets, but there is sometimes only one (or no) bid.
Re Rillion’s point above: “If a seller was obligated to accept the first offer at asking price, there would be no way for them to get the true value of the property if they mistakenly underpriced their property. So you would have sellers asking for double what their property was worth knowing that they could then accept the highest offer, not be obligated to accept the first offer at asking.” Maybe, but be aware that this is how each of the 10,000+ items at Safeway is sold to each customer each day. Safeway sets the price that it decides to sell a product at, and I and other Safeway customers then decide whether to buy at that price. The market seems to work OK.
Perhaps a car dealer is a better analogy. Each car on the lot has a sticker price attached to it, and I (like most car buyers) want to and try to pay less than the sticker price when buying a car. If the car’s sticker price is $30k, I’ll do my research and see if I can negotiate it down to $28k. But if I can’t negotiate the price down and if I really want the car, I’ll pay the sticker price for it. But I won’t pay more than the sticker price, and I know few people who will.
Here’s the analogy to the SF real estate market: The car’s sticker price is $30k, but the dealer won’t sell it to you for less than $35k. In fact, the dealer even advertises in the paper and on the web that the car can be bought at $30k, but once you have taken a test drive and try to accept his offer, it’s only then that he tells you can’t have it for less than $35k. This actually happened to me and a friend of mine. I remember shopping with him for his BMW in the tech bubble days of 2000 on the Peninsula, and a dealer tried to pull this tactic on us – the sticker price of the car was $30k, we took a test drive, liked the car, and then the dealer told us we could have it for $35k, notwithstanding the fact that the sticker price was $30k (“I don’t know … I have lots of other interested buyers…”). What did we do? Following a fairly nasty exchange of words, we left the lot pronto, went to a dealership on the east bay, bought the same model at slightly less than sticker price, and vowed never to return to the lot on the Peninsula. And we never have. Ditto real estate agents that try this tactic. I’m not a real estate agent nor am I in the industry at all (but may be a buyer in a few years, which is why I visit this site), but I do believe that there are enough ethical sellers and ethical seller agents in SF that, as a buyer, I don’t have to (and as a matter of principal, won’t) deal with anyone I think is unethical or insisting that the only way I can get a car with a stick price of $30k is to pay $35k. I as a buyer won’t put up with it, and no buyer should.
Rillion is right that sellers under my scheme would probably respond by setting the offering price (what used to be called the “asking price”) at a higher level than they do now. That’s fine. And, just as now, if the house doesn’t sell at the offering price, the seller can wait it out to see if a buyer willing to pay that price comes along or the seller can decide to reduce the offering price. Just like now with a house that doesn’t sell. And just like a car lot. Sellers can decide to negotiate down from the sticker price, or not. That’s all fine. What they can’t do is decide to offer the house at $1.295m and refuse to sell it for anything less than $1.4.
Re Paco’s comment: “what if brokers stated “sellers will accept the highest bid” and then offerred a “suggested minimum price”? Would that work for you?” Sure, as long as the suggested minimum price is a price that the seller will in fact sell at.
I don’t think that it should be required to accept offers at the listing price, but I question the judgment of those who do this kind of thing.
There was a house last year that had sat on the market for 45 days. I thought they were asking a bit much, so made an offer for about 10% under asking. Their agent claimed they had just received another higher offer and the seller was absolutely inflexible on price. Three days later the listing was updated with a new asking price that was 10% higher. It sat on the market another 30 days, then was withdrawn.
I don’t think it’s unreasonable for me to feel that my time was wasted.
I see your example Mark, but I still feel selling a home is more like Ebay or Chrities (auction) and not like the car dealer. due to interchangeability.
In your example, the BMW is a fungible product. You can get one from the Peninsula, or THE EXACT SAME one across the bay. Thus, one dealer messes with you, you simply go elsewhere. This is what gives you the ability to not pay above sticker price.
Also, the fungible nature of a BMW means that price discovery is easier for the seller. After many sales of the exact same product, BMW will know what a BMW 5-series is worth, and thus can create a fairly accurate “sticker price” based on supply and demand.
housing does not have that fungibility. thus, price discovery is much more difficult for the seller because in the end all houses are truly unique.
A seller may have “comps” but as you all know the comps leave a lot to desire. thus, it is difficult to know where to price one’s home, even for an “expert”.
Also, if a buyer finds the house of their dreams, and the seller chooses not to sell, then they can hardly go across the bay to buy the EXACT SAME HOUSE.
This is why buying a house is (and always has been) by a bidding process. bidding wars are hardly new, they’ve been around for decades.
Re ex-SF-er’s comment: It’s a fair point. And I’m not arguing against bidding. I’m only arguging against sellers and seller agents setting asking/offering prices at levels less than they are willing to accept. Buyers under my scheme can still bid above the asking/offering price (just as my friend could have paid $35k for a BMW in which the sticker price was $30k, if he really wanted that car), and if they do, they will have a greater chance of getting the property (or the car).
But, with respect, I think ex-SF-er exaggerates the non-fungibility of real estate – condos in particular. I know sellers like to think that their property is unique and perfect and that there is nothing comparable, and they market it accordingly. To some extent, the non-fungibility of real estate is true: Unit 17E of a condo high-rise does have a slightly better view than does Unite 16E, and maybe non-fungibility is 100% true if the property at issue is something like Hearst Castle. But a condo in the Mission is a condo in the Mission, and a house in the avenues is a hosue in the avenues. Granted, the 17E and 16E aren’t identical in the same way BMWs are. But is real estate really so non-fungible as to give sellers all of this manipulative power over buyers?
If a buyer believes that real estate is non-fungible, and s/he really wants a particular property, it’s game over. The seller has the buyer, and the buyer can’t take a walk. But I don’t believe that real estate (condos in particular) are really that non-fungible. I remember my buyer’s agent in Santa Cruz ten years ago telling me that there is no “perfect place” for me but rather that there are “perfect places” for me – i.e., that real estate is at least semi-fungible, and if I wasn’t able to get great place A (Unit 17E), great place B (Unit 16E) would come along eventually. She was right.
Buyers can and should walk in the face of unethical sellers engaged in sales tactics designed to manipulate them.
ex SF-er is right, you cannot compare a non-unique $30,000 txn to a unique $1.3m txn. When the amount is that large and the “value” that unknown, there is no way you can legislate seller intent. The pseudo-auction format is very reasonable: seller gets highest price, buyer pays what they are willing.
I certainly agree with the frustration with these practices (I have some experience — we were able to buy our place in 1998 as the 3rd highest bidder because the two higher bidders said “drop dead” when the seller countered them with even higher demands). I think ex SF-er has it right that the root of these odd real estate sales tactics is the difficulty with price discovery in a product market where the products are not identical and values fluctuate. (As a parenthetical, I also agree with Mark D. that no home for sale is so unique that there is no other unit buyers would buy, so the seller’s leverage from this factor is not that strong).
But note that the tactics being discussed only come into play at all where it is somewhat of a seller’s market — i.e. where the seller is fairly confident that multiple buyers will be interested in the place. We’re now becoming (or have become — look at the DOM stats) a buyer’s market where the exact opposite can happen and it may also seem “unfair.” For example, where a buyer is fairly confident that there is little or no competition from other would-be buyers, he is free to make an offer that is well below the listing price. The buyer might reject it, then when it is apparent that no better offer is coming, contact the offeror and say, “OK, now I’ll take it,” to which the buyer is free to counter with an even lower offer. Happens all the time in other parts of the state where buyers have the leverage.
Unfair? No, just part of the price-discovery game. I don’t see anything wrong with it on either end.
(I agree there are lots of other practices in the industry that ARE sleazy — de-listing and re-listing to skew sales stats, keeping properties off the MLS to manipulate volume and DOM stats, shell bids, etc. — those are pure market manipulation tactics, not legitimate price discovery, and would land you in jail in many other fields).
well said pwb
Mark D:
I agree with you… if the property is run of the mills then this tactic won’t work as well since the buyer can simply replace the house with another. These tactics only work in a low inventory environment, which we currently have in parts of SF. (excepting newer condos in transitional neighborhoods which IMO are a dime a dozen and will not be able to do this)
If the reverse occurs: high inventory with lower demand, then a pseudo-reverse auction can and does occur. It is not uncommon right now in areas such as OC for a buyer to pit multiple sellers against each other. They force each seller to “bid” out the lowest price (or more giveaways) against one another… and the buyer has no requirement to acutally purchase until they sign the offer…
As I said in my original post on this thread, the sellers ARE taking a risk here that the offer they rejected is the highest they’re going to get. I’ve seen greedy sellers get their butt handed to them before! (my partner at work had an offer they rejected on a Miami condo because it was “too low”. 2 years later and $3000+/month of holding costs they wish they would’ve accepted!)
again, I’m not saying I LIKE the idea that housing is an auction-like process… only stating that it’s been an auction-like process for some time, for the reasons elucidated above.
Why are the sellers and agents being blamed for bidding wars? Sellers and agents should be able to list for whatever price they want. Yeah, even for $1.00.
The buyers are ultimately responsible for the bidding war. If buyers don’t bid … there is no war. Plain and simple.
When I went to look at properties with my agent, she kept telling me to overbid every single property we looked at. I found that to be utterly irritating. I told her that I will not pay a single dollar more than asking for ANY property, and I will NEVER engage in a bidding war. If someone else wants the property that badly, they can have it. I’ll move on. And, if that means I’ll be looking forever, then so be it.
Let’s stop blaming the sellers and agents for everything. The buyers are 100% accountable in bidding wars.
Oh … needless to say, I have a new agent. 😀
and still no house…
its not about the asking price; its about figuring out how much you want to pay and sticking to your guns. if you pass on a property that you really want b/c of the principle of not wanting to get in a bidding war then you may miss out. or maybe you really just want to buy when you feel that prices have come down and the tide has shifted to a buyer’s market. some people need to feel that they ‘got a good deal’. and there is nothing wrong with that IF that matches the market you are in.
i personally HATE to chase the market, but sometimes there is no other game in town; its been an overbid situ for almost ten years now and sf is a small pool. anyway, the tide does seem to be changing, albeit slowly.
“and still no house…” and I’m perfectly OK with that. I already own one. The second home is “just for kicks” … just because I can.
“its about figuring out how much you want to pay and sticking to your guns.” That’s my point exactly. Any property that I look at, obviously, the listing price is what I’m willing to pay (or less) for that property. Otherwise, why would I waste my time? My point is that if a property is listed for $899,000, that’s what I’d be willing to pay, not $899,001.
And, paco, you must’ve missed the part in my post where I said, “if that means I’ll be looking forever, then so be it.”
This is one of those things people will be upset no matter what you do. If you price too high, somebody will be on socketsite with a “dream on idiots” posting.
Sometimes the high bid does not win if it is clear it is a stretch that the bidder will get financing or be able to make a 40 day exchange contingency work. A lower bid that is able to show cash on hand can win over some sellers.
The process is imperfect and frusrating, but eventually works for most people.
“The process is imperfect and frusrating, but eventually works for most people.”
It could be significantly improved however.
A much better way would be to make it more transparent.
As example, (off the top of my head), a seller would list his/her property with a starting list price. Then buyers could bid whatever they wanted. It would all be posted on a central website, so that buyers could see IF THERE IS ACTUALLY A BIDDING WAR. It would simply list the list price, the current high bid, and a NAME for the person bidding.
Just like Ebay. Great way to sell a house.
To me this is important because when I tried to buy one time I was told there were “at least 6 other bidders” on a house with the Realtor wanting me to bid higher “to make sure”. I don’t bid over the asking price, so I neglected, and the house was “sold” to someone else. A week later I saw the same house on the market. Clearly there were no “multiple bidders”
I confronted my realtor, and she said that the highest bidder couldn’t get financing or something… but there is no way to check the accuracy of this claim.
so I dumped her as my realtor.
in an auction, or on e-bay, isn’t a seller obligated to sell as long as there are bids over the minimum bid price? i’m not sure about the rules of e-bay, but in auctions as i see on TV (for antiques, real estate, celebrity’s worn underwear, etc), they state the starting bid price, and then simply sell to the highest bidder. are there auctions where they will withdraw the sale because there were not enough number of overbids?
condoshopper:
I don’t know anything about TV auctions for celibrities’ worn underwear, but in real estate, the courts have ruled that the asking prices you see in real estate ads are only “invitations to negotiate” and are not true offering prices. You as a buyer can make whatever bid you want – at the asking price, above the asking price, below the asking price, whatever. The seller is under no obligation to sell to you at your bid price (or indeed at any price) until she or he accepts your bid and a binding sales contract is formed.
hey s ‘n s,
i think you misunderstand me. my point is that you, as a buyer, need to figure out what the property is worth to YOU and bid accordingly. i would not take advice from sellers or brokers who were telling me what i should pay. in other words, somebody else’s idea of value (represented by the listing price) does not matter to me.
the key dynamic here is that many others are competing to get the place, and they have their reasons for paying what they think it will take. maybe they just sold their place, or got a bigger bonus, or just moved and want to settle once, or are about to have a baby, or their friends live on that block etc…obviously there are many different values for the same property.
so as i said before, figure out your price and stick to your guns.
and blame yourself if you would have paid more but did not b/c you did not want to overbid.
There’s nothing wrong with bidding over the asking price if a property is worth the extra money (to you) or if the market is hot and that’s what you feel you need to do to be competitive. That’s capitalism at its best. I’ve got absolutely no problem with that.
And yes, every buyer wants to pay the minimum possible, and every seller wants to get the maximum. I’ve got no problem with that, either. I’ve been on both sides many times, and I’m no different than anyone else in that regard.
What I DO have a problem with is the sellers and agents who view putting a home on the market as a fishing expedition. They list it low in the hopes of generating lots of interest. That’s fine. But if the offer(s) they get don’t go high enough ABOVE their asking price to satisfy them, they reject them all. There was never any intent to sell for the asked-for price. The asked-for price was just a tease.
I am not saying that a seller needs to accept the first offer that comes along at the asking price. Certainly it’s reasonable to leave a home on the market for a period of time and see what offers come in. But if the only offers you get are at your asking price, it’s sleazy to reject them all for the sole reason that you wanted more than you asked for.
Bottom line: In my opinion, a property should never be listed for less than the worst-case price the seller is actually willing to accept.
This practice of pricing things lower than the seller will accept everyone’s time, and is deceptive and unethical. And now I’ll stop posting, because I think I’m largely repeating myself. 🙂
Hi all,
Remember 2155 9th ave, asked 1.295M, sold for 1.948M with 30 bids? I think that epitomizes this discussion. The person who bought it has had some work there going on for about 8 months and has not even moved in. Somehow it was worth it to that buyer. Go figure. Bottom line – it’s a crap shoot. Roll the dice or don’t play.
When is a price not the price? When is over asking, not over asking? All this focus on the list price, the list price is not the final arbiter of value. The marketplace sets the value.
Whatever a property ultimately sells for is the market value. Offer what is worth to you, what make sense for you. If you get it great, if not, that is good news as well.
Who would buy a property that does not make economic sense?
Sometimes properties are worth more to one person than another.
Nothing kills a sale as quickly as overpricing.
Selling homes is not the same as selling widgets.
Widgets are uniform and perform the precise same function for everyone. They are interchangeable, moveable, transferable and are not tied to the earth.
Homes are all pretty unique. Even in a brand new complex of stacked similiar floorplans, there are subtle differences, orientation to light, space, relation to noise, street, view, elevation neighbors and environments that make each one unique.
Fraud to accept an offer over asking?
Fraud is three card monte. Click on this link to confirm you banking details, you have just won the irish sweepstakes, My Nigerian business partner, carrying 23 million in bonds, died in a plance crash leaving no relatives behind, that is fraud. Having a separate social security system for elected officals, that is fraud. Having public officals give themselves better benfits and care then they offer their constituents, that is fraud, running for office when you do not live in town, can be fraud. Insurance that doesn’t pay, fraud. Accepting on offer over asking, sounds like a good business to me.
It is certainly not that way in the rest of the country. It will be a sad sad day, when it does not happen here. Be careful what you wish for.
Selling homes is not a retail experience.
Gosh – Kathleen! I love you!
Ex-SFer:
I think an e-bay style auction might not serve buyer and seller very well. Sellers have discretion to pick offers that maximize their price and limit the risk of falling out of contract when the buyer can’t get a mortgage or sell their home on a contingent 40 day exchange. I know people have tried e-bay style real estate auctions and I gather they have a poor track record of actually closing the deal.
I know it is frustrating to be outbid, it happened to me and I had the money to bid higher but because of the blind bidding process felt my high bid was safe enough. In an open process I would have known the other bid and just bid even higher. As hard as it is to believe the realtors did not try to job me in to bidding higher and we put in a back up offer with the help of both our buyer’s agent and the seller’s agent.
I would expect that a listed bidding system would actually drive prices higher as people would know they had to bid more to get the house they wanted. It would also open the way to phantom bids that could be used to manipulate buyers into bidding higher.
I don’t think agents are engaging in fishing expeditions by listing low. The sellers may be or they may not really know what they want. But for an agent that would be an expensive fishing expedition with no reward– all the cost of listing, staging, making brochures, time spent showing the property (instead of a property they actually intended to sell), all with little prospect of getting a commission because it is a fishing expedition. To say an agent would engage in this monumental waste of time, effort, and opportunity cost of not representing properties really intended for sale strikes me as paranoia and sour grapes!
That your real estate agent did not let you try to put in a back up offer is surprising, but hey, just find a better buyer’s agent. Most sellers will take back up offers and even desire them so they won’t have to relist a property (which is one of those things that can cause a property to linger on the market).
And as expected, 2016 Pacific Avenue #203 closed escrow on 1/25/08 with a contract price of $1,375,000 (6.2% over asking). No word on whether or not the pre-emptive bidders bid again (or whether or not we’ll be invited to the housewarming).