Home Buying in San Pablo>Question Details

Anne, Home Buyer in Richmond, VA

Is it ethical or legal for agents to list REO properties purposedly low to create a bidding war?

Asked by Anne, Richmond, VA Sun Jun 15, 2008

How successful is this tactic?

Help the community by answering this question:

Answers

8
Dot Chance’s answer
Anne, I can see how you feel "misled" in this situation. Sometimes when a listing is priced on the low side it is because the seller/bank just wants it off their books. Oftentimes the result is what you must be experiencing - a bidding war.

I know it is frustrating, but hang in there - you'll find the right house at the right price eventually!
Web Reference: http://www.DotChance.com
0 votes Thank Flag Link Tue Jun 17, 2008
There is a fine line between purposedly posting low listing price to generate interest and the normal ups and downs of real estate transaction. The former is really a questionable practice from my perspective. I bought 2 houses before and understand the competition and negotiation involved. I went through the effort to discuss and prepare an offer with my agent, put down the 'earnest' money, get myself preapproved. All these take time and effort. The assumption is there is good faith on both sides. If it turns out that the bank has a different bottomline all along, I don't see how this can be ethical. Maybe this is how business is conducted nowaday. In bank's defense, it's not just them. I heard many buyers/investors throw everything at the bank and see which one sticks. Well, sooner or later more people will get accustomed to how the game is played and adjust accordingly. Then new tricks will have to be invented. Not sure this is good for the real estate profession.
0 votes Thank Flag Link Mon Jun 16, 2008
Anne, I am not saying you can't get a good deal with a short sale or a foreclosure, because you can, but it takes a special breed to be able to handle all the ups and downs of those sale processes. I am sure there are plenty of homes on the market that are not in those two catagories, meaning typical resales, as well as some new construction. Both of the latter will usually have repair contingencies and/or warrenty protection. Like I said, you can get a good deal, but if it turns into a bad deal a month after closing, you can count on one finger who will pay for any problems.... YOU. As far as I am concerned, nothing beats new construction.
0 votes Thank Flag Link Mon Jun 16, 2008
Thank you, Daniel, for this helpful information. I have to say, as a buyer, I am not too thrilled about this bidding war strategy. I feel misled. It does not seem like honest advertising. If I could help it, I would avoid dealing with situation like this. I am a serious buyer, not a prospector, with great credit (780+) and willing to put down 30% down. I don't like to feel played.
0 votes Thank Flag Link Mon Jun 16, 2008
Anne, most banks get 2-3 evaluations from Realtors and then an appraiser's opinion before putting properties on the market. Agents are graded by the banks on what percentage a property will sale for. So depending on the subject and how's its evaluated usually dictates market price.
Web Reference: http://www.danielripper.com
0 votes Thank Flag Link Sun Jun 15, 2008
Hi all, thank you for your answers. Why is it not a good idea to present multiple offers to the bank? How does this bidding war work? Listing agent submits offers when they come in, or he/she bundles them? I am not particularly looking for REO or short sale, but it's hard not to run into those nowadays.
0 votes Thank Flag Link Sun Jun 15, 2008
Yes, it is. Even though we don't like it, but if that's the only way to get buyers to pay attention and make offers on the property, then maybe that's the only way to go.

I am often surprised at how buyers refuse to make lower offers on a nice, none short sale/none REO homes but will dive in and overbid on a lower priced REO home and ended up paying more in the process.

So, perhaps it's not whether it's legal or ethical for agents to do that, but how realistic are buyers now a days and how they operate psychologically.

I do disagree with Chris on one thing (sorry, Chris) - many times the agent will say on the listing that the bank can refuse or accept any offer (which is true). So, even if there are five offers, the bank has it's own bottom line, they may or may not accept the offer even at listing.

Sylvia
0 votes Thank Flag Link Sun Jun 15, 2008
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
Contact
I agree with Chris. One thing though, REO listing prices are usually approved by the lender, so they are aware of the possiblity of the full offer, but still it's not likely.
0 votes Thank Flag Link Sun Jun 15, 2008
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2015 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer