WHY would a buyer offer more than the asking price of a property?

Asked by Ovp, Paterson, NJ Tue Oct 6, 2009

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Deborah Madey, Agent, Brick, NJ
Wed Oct 7, 2009
A knowledgeable buyer will structure their price and offer predicated upon market data, not what a seller asks.

Some (many) sellers price high, in the hopes to leave some wiggle room for negotiations. Other sellers utilize “underpricing as a market strategy.” I strongly support the latter, so long as there are active buyers in the market to compete and it is a conforming property. I do not recommend underpricing as a strategy for highly unique properties.

When there enough active buyers in a markeplace, underpricing will facilitate mulitple offers and allow the forces of supply and demand to achieve the highest and best price for the seller. While this marketing method can be highly effective, most sellers are reluctant to engage it. Most sellers fear they have left money on the table, and prefer to “try it” at a higher price, and adjust if necessary. Some sellers are still adjusting 300 days later.

There is nothing wrong with paying over list price. There is also nothing wrong with making an offer substantially lower than list, if the market and situation support the low offer. Base offers on market forces, not ask price.

All the best,
Deborah Madey - Broker
Peninsula Realty Group - New Jersey
1 vote
Sharon and K…, Agent, Livingston, NJ
Tue Oct 6, 2009
Dear Opv1975

I like to compare sale of real estate to ebay. If you think about it, when something is priced below its value on ebay you will have many bidders trying to get it realizing that the value is there and at the end the product will get higher price than the starting bid. However, when a product on ebay is overpriced most people will not have an interest being they don't see the value in paying that price for it, since they can get it cheaper elsewehere.

Same basic principle applies to selling real estate. It's a bit trickier and more nerve wracking for a seller to place the home on the market below the marke value price but it will draw tremendous attention from potential buyers making it the "hot property" on the market and will draw mutilple offer that probably result in higher price.

Another example could be a forclosure property that is put on the market by the bank. If the value is greater than the asking price and it's in good condition and in a great location, the same as ebay scenerio will happen and there will be a "bidding war" and there is a chance the purchase price will be greater than the asking price.

Every property is different and you must check the comparable homes in the area to evaluate comperable homes to determine the market value. Hopefully you have a great realtor who can help you in the process.

Karen Abramson
50 E. Mt. Pleasant Ave.
Livingston, NJ 07039
1 vote
Mary Petti, Agent, Edison, NJ
Mon Aug 27, 2012
This question was asked in 2009....answers still apply, but I doubt the questioner even saw the answers from the past few days....
0 votes
Hugo W Meza, Agent, Clifton, NJ
Sun Dec 13, 2009
I believe they have answere your question already. Many banks are using "underpricing straegy" for their REO listings. Most buyers are educated buyer now therefore they know the value of the property they are looking. Buyers are the ones that gives value to the properties, we,the realtors, only suggest a price. Of course, most buyers tend to start high!
0 votes
Dallas Texas, Agent, Dallas, TN
Thu Oct 8, 2009
If home has equity buyer truly has to have that property their dream home going have a melt down if they don't get it AND if there is bidding war, IF home can appraise for executed sales amount YES then submit an offer over list price secure home

National Featured Realtor and Consultant, Texas Mortgage Loan Officer, Credit Repair Lecturer
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0 votes
Brenda Conno…, Agent, Avon by the Sea, NJ
Wed Oct 7, 2009
A buyer would offer more than asking if they really want the house and they feel that other offers will be coming in on the property..Over asking should fend off other potential bidders on the property.
0 votes
Denise Guet…, Agent, Chester, NJ
Tue Oct 6, 2009
Basic economics....Supply and Demand. If a property is price to sell and more than one person sees the "value" the price will go up. I recently had a offer on a property that was 1 day on the market and had two offer. We came in at full price and figured they would come back to us with "bring us your highest and best" By day 3 there were 8 offers on this property and I told my buyer to come in a a price he would not be upset if he did not get the property and that he would not feel he over paid. He came $25000 over asking and got the property. He was happy as was everyone else. Also by the way the property appraised for $10,000 over that. So in his eyes he got a deal. Its not where you start it is where you end.

Denise Gueterman Weichert Realtors 142 Main Street Chester, NJ 07930
908-303-2472 Cell denisegueterman@hotmail.com Email
http://www.denisegueterman.net Website
0 votes
Diane Glander, Agent, Spring Lake, NJ
Tue Oct 6, 2009
Because the asking price is only that--asking. Sometimes houses are priced low to deliberately generate multiple offers.
The bottom line is that a house is worth what the market will bear. So, a house that is priced below market value will probably sell for higher than the list.
Web Reference:  http://www.dianeglander.com
0 votes
Gloria Laugh…, Agent, PRINCETON, NJ
Tue Oct 6, 2009
From personal experience the following 2 reasons come to mind: (1) there are competing offers for a desirable piece of property or (2) the owners are contributing to the buyers closing costs.

It is not uncommon for this to happen.

Gloria @ Coldwell Banker
0 votes
Myrick Tanti…, Agent, San Francisco, CA
Tue Oct 6, 2009
There may be several reasons why a buyer places an offer above the asking price of a property.

Two main reasons are the following:

1. The buyer is competing with other offers and has obtained knowledge that the other offers fall around the listing/asking price.
2. The seller has priced the home well below market value, hoping to stimulate multiple offers. The buyer realizes this and wants to go into contract before other offers are presented to the seller by offering more than the asking price of the property.
0 votes
Bill Eckler, Agent, Venice, FL
Tue Oct 6, 2009
People that place an offer that is higher than the "asking price" do so because they feel their offer is reasonable and in line with the current local real estate value trends and generally feel the home is ideal for their purposes.

If financing, the bank will do an appraisal that will varify the accuracy of the home's value. If the home does not appraise for the appraised value it is unlikely that the bank will provide financing.
0 votes
Chris Capps, Agent, Richmond, VA
Tue Oct 6, 2009
Were you on the winning or losing end of the deal?

Chris Capps, Realtor
Residential Real Estate Specialist

cell 804.896.6945
office 804.740.1644 ext. 103
fax 804.545.7224
email chriscapps@oakstoneproperties.com
web http://www.chriscapps.com

“It's Time to Expect More From Your Realtor®”

Licensed in Virginia, with contacts across the country
0 votes
Pablo Lopez, Agent, Clifton, NJ
Tue Oct 6, 2009
There are many factors that can contribute to a home been sold for higher price than the list price. It is not strange for a buyer to finance closing cost in to the purchase and offer over the sales price also known as sellers concession. A feeling that the home might be worth more than the asking price, The home might be a must have, when value is important price don’t matter. Wanting to take out of the way any competing bids. It is hard to single out one particular reason.

Pablo López
Century 21 Elite Realty, LLC
337 Changebridge Rd
Pine Brook NJ 07058
973.244.7980 Ext 215
0 votes
John Sacktig, Agent, New Jersey, NJ
Tue Oct 6, 2009
There are many reasons that this could happen.

Most probably you have a savvy buyer that knows the market, saw a great deal and jumped on it.
I always tell my clients to slam dunk a deal when they can. Due diligence is the key to every transaction.
Is the house worth more then the list price? is it a short sale? is it a good deal?

Do your research and the answer will reveal itself to you.
0 votes
CCC, Home Owner, San Diego, CA
Tue Oct 6, 2009
Because the buyer had bad experiences on bidding wars. Losing the bidding war.
Because really, really, really wants the property.
Because needs a place to live soon and do not want to rent.
Because it is an action.
Because there is a feling that the property is worth more than listing price.
0 votes
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