Home Buying in Boston>Question Details

buyer982, Home Buyer in Boston, MA

Are realtors intentionally listing homes lower than their actual value to increase demand and create a 'silent auction'?

Asked by buyer982, Boston, MA Tue Apr 23, 2013

Already lost two homes with offers above listing price. We have no idea what to offer because the listing price is clearly so much lower than what people will pay. Also, why is there no bidding war? It seems strange that the highest offer is just accepted with out giving other bidders a chance to go higher.

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I have found that even when I list a home at what would seem to be an appropriate price, I still have multiple offers. This has been happening for more than a year and is particularly due to the low inventory levels. Yes, it does produce competition to price a property slightly low or at value, however real estate is a market and the market will always bid a property to whatever price they see fits the value, so list price is almost irrelevant. If the property is over priced then the market will bid lower or wait for it to be reduced, if the property is under priced then there will be multiple offers to bid it up to the value the market sees.
As to the highest offer being accepted, this is up to the seller to choose whether they wish to do a "best and final" and allow buyers to raise their bids or simply choose an offer. As an agent, I never know what my sellers will do until we evaluate offers and often there are terms that a seller prefers, not just price, that mean they simply choose one.

I have to agree that the best weapon these days to have is a super smart buyers agent on your side. Someone with good strategies for bidding wars and that can help you to present yourself as the best choice for a seller. Good luck!
2 votes Thank Flag Link Tue Apr 23, 2013
Maybe. In many markets, underpricing a house can lead to buyers making non-contingent offers (waiving financing, conduction preinspections and waiving that contingency), which is to the seller's benefit.

It is difficult to figure out what to offer, but I will remind you (and other readers) that when the market was slow, the listing price was higher than what people wanted to pay, and they would lowball even if the property was listed at Free. "Free, you say? Will you pay closing costs, too?"

Finally. The reason sellers like to take the highest offer is because it feels the most sincere. You go back to the other buyers, maybe they say they'll pay more, but what if they have a contingency, and a week later, when the pressure is off, they decide to revert to their original price?

Basically, buyer, this is what a seller's market looks like.

All the best,
2 votes Thank Flag Link Tue Apr 23, 2013
I have some folks that have lost out in bidding wars, and it can be very discouraging. As an agent, even I have been surprised at what folks might be willing to pay for a certain property. Recently, I had a couple lose out on a bidding war where a house was grossly overlisted and someone put an offer in at asking price - most likely because they were afraid to lose the home. I do not think the home will appraise for this amount, and I do not think the home is worth this price. Neither did my buyers, and they were smart not to let the market frenzy affect their decision making and walked away from the war. I now wonder if the other party had an agent on their side advising them. Don't let list prices sway you too much from your budget and what value the home is to you. Your offer really should be the price you are comfortable paying for THAT home. As far as best and higher calls, when listing I do suggest these to sellers. Our goal as listing agents is to get the best price for the home. However, some sellers are happy to see an offer that meets their needs and want to secure it immediately. Often they are tired after preparing a home to sell and just want to move on to the next step. Asking for best and higher could have some drop out of the race leaving others not as credit worthy.
1 vote Thank Flag Link Tue Apr 23, 2013
First off sellers can take any offer they want. They do not have to go back to buyers for highest and best offers. It is hard to know what a seller will do. Or maybe they went back to the highest two or three offers only. There are no rules or laws governing what a seller will do in a multiple offer situation.

Secondly, if I have a desirable house, I will bring it on right at or slightly below market value and withhold showings for a week and allow 3 or 4 days before offers are presented. It is a technique some agents use and if done correctly will immediately produce multiple offers.

What you need to do is determine fair market value of the home and put your best foot forward coming out of the gate. A seller can list a home for any price they want. Some are drastically overpriced some are slightly overpriced, some are listed right at market value and others are listed below. A good buyers agent will help you determine what fair market value of a home is at any given point.

Being in a multiple offer situation is difficult at best for anxious home buyers. If you feel the home is a great value so will other buyers. Sometimes it will drive a house up past fair market value because of the competition among buyers. When you are in this situation, put your best foot forward and offer your highest and best immediately. Don't forget there are other factors such as closing date and financing that can make an offer more attractive.

Best of luck to you!
1 vote Thank Flag Link Tue Apr 23, 2013
Bidding wars sometimes backfire on sellers ..some buyers will walk away vs. Getting into a position of paying more than the value or more than they want to. Smart sellers take the BEST offer that ma not always be highest.
0 votes Thank Flag Link Sun Apr 28, 2013
Dear Buyer982,

I don't have to tell you how hot the market is in the Metro-Boston area. The shortage of quality homes for sale has introduced some interesting dynamics into the marketplace for sure. With prices rising so dramatically it's making it a challenge to price a home correctly since the comparable sales we use to support pricing proposals tend to lag a moth or two behind real-time market activity. Luckily for Sellers (which will be you some day too!) there is minimal risk that a property will sell for less than it's worth in a market like this because competition will drive the price up to what the fair market value is. The danger of overpricing is still there, though, so a Seller still needs to be a little conservative with pricing. Once it hits the market, a frenzy of sorts ensues. I doubt there's any intent to underprice properties (sellers won't typically play along with that kind of thing) but I can understand why it can look that way from a buyer's perspective.

Real Estate Agents will work with Sellers, but also with buyers, so we get a front-row seat on both sides of the proverbial table. The above situation is what Sellers are experiencing which is a lot more pleasant than what buyers are going through right now. Even experienced, competent agents are having a hard time getting offers through when they are working with buyers. I consider it vitally important to be up-front with new clients about what they can expect to go through as they search for a home in a market like this, but it doesn't sink in until a buyer swings and misses a couple of times. Strategies that got offers accepted a few months ago don't seem to be doing the trick any more. At a minimum I advise my clients that their initial offer could easily be the only chance they are going to get at putting a property under agreement. We sit down and come up with a number that they can live with if they "lose" on a property, and that number also has to be one that they can live with if they "win" on a property. When I work as an agent for buyers I really miss the days when I could actually have some hope of negotiating from a position of strength. My main contribution to a buyer these days is to use what I know to actually get an offer accepted. At least in a climate like this it's reasonable to hope that what might feel like an "overpayment" at first will be absorbed by appreciation in value later.

With a little bit of luck, a sense of humor, and a ton of determination you will succeed eventually. It's not an easy thing to do right now, but it's so worth it in the end!

Sincerely,
George Wood
0 votes Thank Flag Link Wed Apr 24, 2013
Realtors do not own the property; SELLERS do.
We can ADVISE the Seller about the Comp's and the Market; but it is the Seller's decision.
We don't get the blame or the credit when the market goes up or down.
0 votes Thank Flag Link Tue Apr 23, 2013
It is a sellers market now with more demand than supply, some buyers are catching on and offering well over asking, while it is a strategy to drive buyers into a bidding war there is nothing forcing sellers to engage if they receive acceptable offers. Your best bet is to find a good agent make your honest best offer and keep trying
0 votes Thank Flag Link Tue Apr 23, 2013
It is a sellers market now with more demand than supply, some buyers are catching on and offering well over asking, while it is a strategy to drive buyers into a bidding war there is nothing forcing sellers to engage if they receive acceptable offers. Your best bet is to find a good agent make your honest best offer and keep trying
0 votes Thank Flag Link Tue Apr 23, 2013
In some area they are and banks are doing it as well to force multiple offers. If you want to win in multiple offers you need to have a plan. I have attached a link for a video I have done about this subject. Hopefully it will help you.

Good luck,

Tom
0 votes Thank Flag Link Tue Apr 23, 2013
Buyers are becoming more aware that it is a sellers market. There are far less homes on the market than there are buyers looking. This means that some people will over pay for a home. Due to this, "deals" are becoming harder to find. A well priced house can bring in multiple offers. Many areas are in high demand and multiple offers mean that the winning bid will likely be over asking.

Best of luck in your search.
0 votes Thank Flag Link Tue Apr 23, 2013
It's an extremely competetive market with low inventory, which leads to multiple offers. It is difficult to win a bidding war and depending on the terms of your offer the odds may be stacked against you. I do not know your situation, but many folks will be making minimum down payment offers on properties with multiple offers. The reality is.... if that offer is against a 5%, 10% + offer, even if it is higher may not be the one the seller ultimately decides to accept. Not only does a seller want the highest offer they want to make sure they accept the strongest offer that has the greatest likelyhood of closing.

This is not all that uncommon, I tell folks to consider renovation financing as an alternative. Find the property in the best location in either the worst condition or not exactly what you want and get a renovation loan and turn it into the home you set out looking for. These are the homes that are less likely to have multiple offers on. Typically your competition is investors. As the purchase price gets closer to the actual market value investors bow out of the bidding. Investors need to make sure they can turn a profit so they need to purchase at a discount.

If you want to reach out and discuss renovation financing in more detail don't hesitate. and remember there is a really big difference between a loan officer that originates and closes renovation loans on a regular basis and one that simply has access to renovation loans.

The best number to reach me at is 781-376-2233.
0 votes Thank Flag Link Tue Apr 23, 2013
Most sellers that list their property want to sell. They and their agent look at the comparable recent sales and develop a pricing strategy given the properties condition, location, amenities, etc. Although buyer and seller eventaully agree to "one" price, there is a range of "fair market value" for which the property will be in.

An experienced buyer agent can help a buyer work through the comparable sales and craft an offer to help the buyer have the best change of being accepted by a seller when they are looking across multiple offers. Price has a lot to do with it but there are other factors which can be incorporated to make an offer even more attractive than one that has a higher price tag attached to it.

Buyer Agents of Boston is an exclusive buyer agency real estate firm (we only work with home buyers in Boston, Cambridge, Arlington, Brookline, and surrounding suburbs) experienced in multiple bid scenarios and helping home buyers find (and buy) the home of their dreams.
0 votes Thank Flag Link Tue Apr 23, 2013
It really depends. Pricing a property slightly lower than market is an aggressive strategy that gets lots of people in to see it and often results in competitive offers. This process is frustrating but an open bidding process is rare. When highest and best offer is called for then everyone involved has to take a shot in the dark and strategically offer their best terms. This is where having an experienced agent comes in handy because there is absolutely a strategy to anticipating what the highest offer will be.

I'm happy to discuss this with you further.

Bobby Woofter
mybostoncondo.com
bobby@mybostoncondo.com
717-917-8842
Web Reference: http://mybostoncondo.com
0 votes Thank Flag Link Tue Apr 23, 2013
It's a great strategy that agents use, they market the property very low and than you have these offers pouring in and it creates a bidding war. If you have a agent that knows when the right time is to pull out than that's what you should do.

Best Of Luck
0 votes Thank Flag Link Tue Apr 23, 2013
Some realtors in Cambridge and JP do this on purpose to generate a bidding war and get the highest price for their clients.
0 votes Thank Flag Link Tue Apr 23, 2013
This is why it's important to work with an experienced buyers agent. Identifying when a property is under priced & the connections to know about the existence of other offers, also assisting you in identifying the best offer price and terms for your situation.
0 votes Thank Flag Link Tue Apr 23, 2013
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