Home Buying in 94110>Question Details

Carmen, Home Buyer in 94110

Are homes really going for 200K above asking price?

Asked by Carmen, 94110 Tue Apr 13, 2010

15 disclosure packets have been sent out. The house is listed at 579, it is a SFH close to St. Marys Park. My Realtor says to bid up to 750. Is that crazy?

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Lance King’s answer

I haven't seen the property and you already have an agent so unfortunately I can't offer much advice on this. What I can say is that if I were looking at buying this property I would want to see comps that support such an offer and make sure that the price point fits with my exit plan goals.

Best Regards,

Lance King/Owner-Managing Broker
DRE# 01384425
0 votes Thank Flag Link Thu Aug 5, 2010
First of all, the answer to the last part of your question "Is that crazy?" is a resounding YES! This situation reminds me of all that happened at the height of the real estate buying frenzy a few years back, where such shenanigans were common place and the gullible, with the help of very liberal lending practices, went ahead and paid much too much for your basic fixer upper.

To better comprehend the dynamics of what causes this sort of blind follower mentality, consider the definition of an auction.

"Auction is where a single item is offered for sale. Bidding starts with a low price, and is raised incrementally as progressively higher bids are solicited, until either the auction is closed or no higher bids are received. Often the seller sets a reserve price below which the item is not sold and the auction is aborted. Perhaps the most common form of auction, it allows a seller to secure the highest price for an item."

Now then, in many communities throughout San Francisco, e.g., Noe Valley, Bernal Heights, some parts of Excelsior, Glen Park, SOMA, to name a few, you'll find some agents and certainly many sellers who believe they can command the price they want without regards to a supportable basis. However, any informed buyer will simply not play by those artificial and biased (towards the seller, of course) rules, waiting instead for a better time, or looking for a better place, and certainly doing a lot of homework before calling a spade a spade. Sites like Trulia may give you a snapshot of the market and its trends, but only through careful study of what has been happening, asking the right people, besides your agent, will you come to understand where you stand in regards to any house and what you may be prepared to offer for it. After all, it really is about supply and demand, and as such, there will always be someone who may have the means and sees something in the offering that compels them to pay considerably more than the better judgment would dictate.

How you establish your maximums and a basis for what you're willing to pay for any given house in any given area will be premised on a couple of important factors: 1) your financial ability to pay; in other words, how much you're pre-approved for through your lender; and 2) your caprice. If you just got to have it at all cost, then you'll be willing to pay as much as is necessary to win the auction.

Speaking of which, and on a slightly different item, a classic car auction, I once witnessed one so-called investor pay as much as $1,200,000 for a 1967 Cobra, the original list price for this car new was $4675 when it first went on the market! So, to paraphrase a sage of our times Forest Gump, "...crazy is as crazy does..."

Hope that helps, otherwise, email me and we can discuss this and other related things further.
0 votes Thank Flag Link Thu Aug 5, 2010
Carmen--I think the key is that you need to know what the actual and likely market value is for the property you are considering. A common listing strategy is to set a very low price that will attract buyers; the more interest there is, the higher the price may go.

Buyer clients of mine wrote an offer on a short sale property recently that was listed at around $75,000 below the actual likely value of the home. We determined a fair price, and our offer was accepted amidst six others. So it's really important not to get sucked in by list price.

Best wishes!
Web Reference: http://insidesfre.com
0 votes Thank Flag Link Tue Apr 13, 2010
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