4 ms·

One can imagine why realtors would want to underprice for publicity or whatever, but why would an owner consent to this?

jorts 5y ago
To drive more potential buyers to come look at it and to drive up the potential of a bidding war.
eslaught 5y ago
Why wouldn't an owner consent to it? The realtor's going to say: if you underprice then you'll get more offers and have a chance of starting a bidding war, which could put the sales price even higher than if you'd priced it more realistically. It seems like a pretty clear-cut case of self-interest. And in this case, it looks like it worked.
kentlyons 5y ago
I've had a similar conversation with my agent in the past, and the answer was to create a bidding war. Once you have one real offer you can go back and counter to all of the others to see if they'll go up, and then rinse and repeat. That isn't a story too hard to sell. The other thing about this one is that it was fixed up, so it could have been a flip. However I didn't go track down the real estate records to know for sure.
kube-system 5y ago
Is there a psychological angle? Exploiting FOMO to drive bids up higher?
s0rce 5y ago
You don't have to sell if someone offers asking and you are nearly guaranteed to get significantly more. The asking price is effectively meaningless at this point.
carfacts 5y ago
Lots of realtors do it in Los Angeles, casual browsing of neighbourhood sales data on sites like RealtorStats show how common it is
jayd16 5y ago
There's no downside to the owner. They're under no obligation to sell for asking price.
Spooky23 5y ago
Remember that you need to assume that every counterparty is an asshole in anything real estate, and everyone who isn’t your attorney has a grift. You can use underpricing as a tool to hide problems with the house. If you have a lot of offers with what is a closed auction, you control the flow of the process and avoid learning things that have to be disclosed. If you “suspect” that you may have mold, foundation problems, lead paint, asbestos, or other problems, you can use the offer flow to cherry pick bidders who don’t demand inspections or cash bidders who don’t have a bank or other party looking for due diligence. Your real estate agent may want to steer business to preferred partners for kickbacks or to ensure that certain home inspectors get used.
- lotsofpulp 5y ago
  Allowing people to bid on something and negotiating prices does not make someone an asshole. I would prefer if all the negotiations were public though.
gnopgnip 5y ago
If you price for the amount you expect it to sell for you might only get 1 or 2 offers even in a hot market. That can still work, you can get a great offer you are happy with right away. But there is a significant risk that you won't get an offer you are happy with without this competition. A buyer who is willing to pay $2.5m might only offer $2.2m if there is no competing offer. You need to keep the home listed for a few more weeks until you get a better offer or more competition. If you put in a lower list price you will probably get 5+ offers, you can either pick the best one, or counter offer a few, and you can be almost certain that you will be under contract by mid next week if you list on a Thursday or Friday. Most people are also buying a home at the same time, if they are moving to another high cost area a delay of a couple weeks on the sale of their home can cause a lot of problems with their purchase.

jorts 5y ago

To drive more potential buyers to come look at it and to drive up the potential of a bidding war.

eslaught 5y ago

Why wouldn't an owner consent to it? The realtor's going to say: if you underprice then you'll get more offers and have a chance of starting a bidding war, which could put the sales price even higher than if you'd priced it more realistically. It seems like a pretty clear-cut case of self-interest. And in this case, it looks like it worked.

kentlyons 5y ago

I've had a similar conversation with my agent in the past, and the answer was to create a bidding war. Once you have one real offer you can go back and counter to all of the others to see if they'll go up, and then rinse and repeat. That isn't a story too hard to sell. The other thing about this one is that it was fixed up, so it could have been a flip. However I didn't go track down the real estate records to know for sure.

kube-system 5y ago

Is there a psychological angle? Exploiting FOMO to drive bids up higher?

s0rce 5y ago

You don't have to sell if someone offers asking and you are nearly guaranteed to get significantly more. The asking price is effectively meaningless at this point.

carfacts 5y ago

Lots of realtors do it in Los Angeles, casual browsing of neighbourhood sales data on sites like RealtorStats show how common it is

jayd16 5y ago

There's no downside to the owner. They're under no obligation to sell for asking price.

Spooky23 5y ago

Remember that you need to assume that every counterparty is an asshole in anything real estate, and everyone who isn’t your attorney has a grift. You can use underpricing as a tool to hide problems with the house. If you have a lot of offers with what is a closed auction, you control the flow of the process and avoid learning things that have to be disclosed. If you “suspect” that you may have mold, foundation problems, lead paint, asbestos, or other problems, you can use the offer flow to cherry pick bidders who don’t demand inspections or cash bidders who don’t have a bank or other party looking for due diligence. Your real estate agent may want to steer business to preferred partners for kickbacks or to ensure that certain home inspectors get used.

lotsofpulp 5y ago
Allowing people to bid on something and negotiating prices does not make someone an asshole. I would prefer if all the negotiations were public though.

gnopgnip 5y ago

If you price for the amount you expect it to sell for you might only get 1 or 2 offers even in a hot market. That can still work, you can get a great offer you are happy with right away. But there is a significant risk that you won't get an offer you are happy with without this competition. A buyer who is willing to pay $2.5m might only offer $2.2m if there is no competing offer. You need to keep the home listed for a few more weeks until you get a better offer or more competition. If you put in a lower list price you will probably get 5+ offers, you can either pick the best one, or counter offer a few, and you can be almost certain that you will be under contract by mid next week if you list on a Thursday or Friday. Most people are also buying a home at the same time, if they are moving to another high cost area a delay of a couple weeks on the sale of their home can cause a lot of problems with their purchase.