Home Buying in Tahoe City>Question Details

Al Colhoun, Real Estate Pro in Tahoe City, CA

As a home buyer, how do you feel about agents significantly under pricing homes to obtain multiple offers?

Asked by Al Colhoun, Tahoe City, CA Thu Mar 21, 2013

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Olja Mihic’s answer
I am not only a Lake Tahoe Agent, but found myself on the other side of the fence, and am actually buying a home for myself in this now rigorous market, and I have to contribute, that at this moment in economy when the interest rates are low, and the investors are not afraid to reach into their pockets, i.e. the market has just turned upwards, I find that this strategy works really great ... on foreclosures. So, not all the time, and not on all properties!

I am finding that investors are reaching for the last breaths of the foreclosure world, and when you give buyers a sense that they are getting a deal, the buying frenzy begins. I am not sure that this strategy works as well on regular sales, as I feel that buyers, instead of feeling like they are getting a deal, may feel that there is something wrong with the property.

So in summary, it works great when there is a large pool of cash ready buyers and a small inventory, when a sense of value can clearly be identified.

Olja Mihic
Lake Tahoe Realtor - Coldwell Banker Tahoe City
530 448 6633
tahoerealestate@hotmail.com
0 votes Thank Flag Link Thu Apr 4, 2013
BEST ANSWER
The forum addresses Realtors--not sue you are getting the audience you desired.

I hate this practice because it confuses buyers as to what is possible, and what is not...it is incredibly misleading. And despite Ron's comments below, I believe this is a strategy that listing agents employ as opposed to the sellers.
0 votes Thank Flag Link Thu Mar 21, 2013
I agree with Bill; that not only can the S.F. Bay area market be a faster pace than our Tahoe market but I think that it is more steady with regards to activity as well. Many of our Tahoe buyers seem to come up and make offers on homes in spurts of good weather, around holidays or times that coincide with summer or winter vacations, etc.. So if you hit a lull with the timing of listing the underpriced property; you’ve possibly risked your seller from not obtaining enough offers to drive the price up.
What if an agent recommends significantly under pricing the seller’s home and the strategy does backfire; has the agent done their job then?
Of all of the Tahoe home seller’s that I’ve worked with, none have ever suggested that we list their home for much less than my Comparative Market Annalysis value range would suggest. With that said; I’ve also not been a fan of “testing the market” with a higher asking price than the CMA justifies which only ends up producing a stail listing and a frustrated seller. I also agree with Mack’s statement that sometimes when an agent satisfies the seller’s request of “testing the market” with a higher price, usually the reason agents get fired because the overpriced home did not sell and I might add; only to see another agent later list the same home for a lesser amount and have it finally sell.
0 votes Thank Flag Link Sun Mar 24, 2013
I think that agents generally feel that there is little reward in "testing the market" with a higher price; usually, the reason agents get fired is because the overpriced property did not sell.

The thing about a rising market is that agents don't all adjust at the same time. When an agent finally gets a listing that they've been working on for several months, they're usually not pushing the seller to "list higher."

Appraisers have a similar problem. They're dealing with six-month-old comps, and finding it hard to adjust to the current market where prices have gone up.

So, I'm not blaming agents for anything, although maybe we can get a little more aggressive with our pricing in a hot market, especially when the recent actives have gone under contract with multiple bids?
0 votes Thank Flag Link Thu Mar 21, 2013
The last time I checked, decisions like this are the purview of the SELLER, not the Agent.
0 votes Thank Flag Link Thu Mar 21, 2013
When there is little inventory on the market and a listing agent sees an opportunity to increase traffic and potentially drive the price higher this method seems to work well. If an agent is getting their buyer the highest price possible in the shortest marketing time possible the agent is doing their job, although this can be extremely frustrating for the buyer side of the equation.

I think that this technique works very well in the sub $700K price range in most Tahoe markets but as soon as you get above $700K there are fewer buyers and I'm not sure that this technique would work as well.

Dave Westall, Realtor
Tahoe Riverfront Realty, Inc.
530-448-9882
David@WestallRealEstate.com
CA DRE# 01796995
0 votes Thank Flag Link Thu Mar 21, 2013
This is a popular strategy in hot market segments of the Bay Area, but less common in the Tahoe area. Tahoe tends to be a slower paced market with less overall activity, and listings spend longer time on market. Therefore, the strategy of intentionally pricing below market value with the intent to attract multiple offers and push the price upward can backfire in Tahoe. That said, a listing agent's job is produce the most favorable outcome for his/her client - the seller. If the strategy is successful to that end, I have no problem with it. The agent has done his/her job.
0 votes Thank Flag Link Thu Mar 21, 2013
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