Seller’s agents in popular areas often price the home substantially lower than market value. When the price is low, it makes the home look more attractive, more attainable, and drives more buyers to come to the open houses. Higher traffic is likely to generate a higher number of offers, which will likely lead to a price the seller wants, or exceeds the seller’s expectations.
Often, seller’s agents price the home lower because there are so few homes of comparable value. In many cases only 1 comp in the past 6 months. They are not sure if buyers will reference just recent 1 comp or 2 comps, even if one of the comps is much less relevant. They don’t want to scare off the buyers and want more people to show up at open houses from a sales standpoint. That’s why it’s a common tradition in super low inventory markets to price the home substantially below market value.
When you make an offer for a home, I help you conduct market research and pricing analysis, which can take several hours prior to preparing your offer.
I often tell my buyers to avoid over-analyzing competitors as it can be counter-productive or irrelevant. Everyone’s personal finances are different. So it’s best to focus on the number that works best for you personally and reference my pricing analysis.
If a type of hot home on a certain street or location only comes on the market once every six months, it’s possible someone who really wants it will pay 5% over the comparative market analysis price range or even next year’s price just to secure such a place for the next 10-20 years, instead of dealing with the uncertainty and more bidding. If the appreciation at that location is 10% in the past year, they make the money back in about 6 months anyways. It’s a long-term investment. But not every buyer must have that location or type of hot home and they may switch to a less competitive location to avoid having to bid to this level. I’ve seen some buyers do that. Bidding for top locations is not for everyone.