Why are some homes selling for so much over asking? It’s not a mystery!
May 27, 2021
In my humble opinion, the phrase “Sold Over Asking” has become meaningless and a bit of a joke.
It wasn’t so long ago that the majority of properties were priced based on what comparable properties had sold for. Many of those properties received offers from multiple buyers meaning that the property, more than likely, sold over asking. In those cases, the sale price wasn’t usually a truly significant number over the asking price; perhaps 10K or 20K more. There was a rule of thumb; 10K over for every offer received. Those days are gone.
Fast forward to today… when you read that a property sold for $600K over asking, it’s not that somebody agreed to pay that much more than the home is worth. In most cases, the home was underpriced to begin with, guaranteed.
Today’s trend is to drastically underprice properties. I’ve even been guilty of underpricing a property or two myself, but not to this extent. There is really only one reason why an agent would underprice a property… Underpricing, for the most part, guarantees to get buyers through the door and pretty much guarantees there will be multiple bidders for your home and the sale price will be higher than the asking price.
It’s not magic. The listing realtor is not a superhero. They just underpriced the property and now they can stick a ‘sold over asking’ sign on top.
Don’t get me wrong, the listing price is your best marketing tool… but the trend of grossly underpricing plays games with buyers’ emotions and the credibility of our profession. There’s an idea in the media today that realtors control the market and underpricing properties adds fuel to that fire.
In terms of how it affects buyers; buyer fatigue is real. Fatigue happens all the time in a challenging market, but add in unrealistic expectations and a blind bidding process on offer night, it’s damaging to people’s psyches, to their hopes and to their ability to buy a home.
Part of the reason why prices are so high is because of blind bidding – a home is priced at $999,900 and the buyer has no idea what it’s worth. Perhaps they’ve been frustrated after submitting numerous unsuccessful bids on homes, so they offer a desperate number over the asking price and that sets the bar.
I believe that if there’s not a lot of inventory, great homes are going to generate enough interest. There’s no need to price at $999K. Price it fairly! It’s a win/win for everybody. Sadly, with the amount of underpriced product on the market today, the houses that are priced fairly don’t get looked at and are now disadvantaged. It’s a terrible Catch-22. Price fairly, the house sits there. Price under, you get attention.
Wal-Mart type pricing should not be happening in real estate; not with people’s homes. Realtors are supposed to be experts, not bargain basement marketers.
If you have any questions about the market or are thinking of making a move, please get in touch!