5 ms·

One thing I don't understand. I hear a lot of stories about a house being sold within a few days (or hours..) for $x over asking price. In these cases, why do s

One thing I don't understand. I hear a lot of stories about a house being sold within a few days (or hours..) for $x over asking price. In these cases, why do sellers not wait for a few weeks, or list the house for a higher asking price?

MuffinFlavored 6y ago
I think the theory is "if you list it at a lower price, it'll incite a bidding war".
- oh_sigh 6y ago
  It isn't really a bidding war, it is everyone guessing at what the next best offer is and trying to beat it. I never understood why, if you have 20 offers on a house and $500k is the best, the realtor doesn't go back to the other 19 and say they need to offer at least $505k, and repeat the process until there is a single offer remaining.
  - sushid 6y ago
    Risk reward ratios are skewed for the realtor. It might make sense for the owners but it's easier to forgo the extra $150 you get as the realtor and just close the deal right now as is.
ativzzz 6y ago
Same here. I've never bought a house so I don't quite know the details about it, but if people are getting 15-20 offers on a house within 24 hours of it going on sale, why not just raise the price?
- bombcar 6y ago
  List it low, get 20 offers over the price, pick the highest/best one. Holding it open for longer is unlikely to get higher ones - it’s basically an auction.
jhauris 6y ago
I suspect many times the seller is also a buyer of a new house, and facing the same kinds of competition. So they need to close quickly on their sale to cover the close on the buy.
bick_nyers 6y ago
I could be wrong, I am by no means well versed in this, but I think they are limited by appraisals and inspections. If the house gets appraised significantly less than the offer, I believe that the buyer can leave their offer, effectively wasting two weeks of the seller's time. The goal then is to get a cash offer that goes through an expedited process where an appraisal is not needed. In addition, for all of the sellers that believe we are in some degree of a bubble, they want to hurry to sell before it pops/deflates.
- shanecleveland 6y ago
  I believe this is correct. And even if the buyer is willing to pay the price, the bank may not be willing to offer the mortgage over the appraisal amount. Cash is king, but not all offers for the same price are equal, such as VA loans with requirements and such. Pre-2008 crash, lenders could pick their appraiser and it was easier for them to have the appraisal match up with the asking price. The lender was likely selling off the loan, anyway. Appraisals are now assigned to a pool. Doesn't mean there are not any shenanigans though. They all still know each other.
jxidjhdhdhdhfhf 6y ago
If the buyer is paying with a mortgage, then the bank will only lend based on what they appraise the house as worth.

MuffinFlavored 6y ago

I think the theory is "if you list it at a lower price, it'll incite a bidding war".

oh_sigh 6y ago
It isn't really a bidding war, it is everyone guessing at what the next best offer is and trying to beat it. I never understood why, if you have 20 offers on a house and $500k is the best, the realtor doesn't go back to the other 19 and say they need to offer at least $505k, and repeat the process until there is a single offer remaining.
- sushid 6y ago
  Risk reward ratios are skewed for the realtor. It might make sense for the owners but it's easier to forgo the extra $150 you get as the realtor and just close the deal right now as is.

ativzzz 6y ago

Same here. I've never bought a house so I don't quite know the details about it, but if people are getting 15-20 offers on a house within 24 hours of it going on sale, why not just raise the price?

bombcar 6y ago
List it low, get 20 offers over the price, pick the highest/best one. Holding it open for longer is unlikely to get higher ones - it’s basically an auction.

jhauris 6y ago

I suspect many times the seller is also a buyer of a new house, and facing the same kinds of competition. So they need to close quickly on their sale to cover the close on the buy.

bick_nyers 6y ago

I could be wrong, I am by no means well versed in this, but I think they are limited by appraisals and inspections. If the house gets appraised significantly less than the offer, I believe that the buyer can leave their offer, effectively wasting two weeks of the seller's time. The goal then is to get a cash offer that goes through an expedited process where an appraisal is not needed. In addition, for all of the sellers that believe we are in some degree of a bubble, they want to hurry to sell before it pops/deflates.

shanecleveland 6y ago
I believe this is correct. And even if the buyer is willing to pay the price, the bank may not be willing to offer the mortgage over the appraisal amount. Cash is king, but not all offers for the same price are equal, such as VA loans with requirements and such. Pre-2008 crash, lenders could pick their appraiser and it was easier for them to have the appraisal match up with the asking price. The lender was likely selling off the loan, anyway. Appraisals are now assigned to a pool. Doesn't mean there are not any shenanigans though. They all still know each other.

jxidjhdhdhdhfhf 6y ago

If the buyer is paying with a mortgage, then the bank will only lend based on what they appraise the house as worth.