My buyer clients recently had a disappointing experience with a deliberately under-priced home in Burbank. It was originally on the market for $600's+ and had a $100,000 (!!!!) price reduction after 30 days. That's really a big drop for a home in great condition and it immediately drew four offers. Yes, even in this market, some underpriced houses are drawing multiple offers. Here's the heavily edited post-mortem email that I wrote them.
"[Buyers] I know the [street name] house was a disappointing situation. But here's some "back story": ...[Some Realtors] are known for deliberately underpricing their properties in order to attract multiple bids and sell them quickly...The strategy is very controversial, but [some agents] and their sellers find it successful. My experience has been that properties sell just as quickly when they're priced correctly, but that's me.
Additionally, [some agents] often have their own buyers for their properties -- who they then have bid against each other for the under-priced houses. The [street name] house was really under-priced for that many square feet in Magnolia Park, so I wasn't surprised that it drew so many offers so quickly, even in this market.
So the take-away is that if it seems too good to be true, it probably is.
Here's what you can do so you're ready to rock next time:
- Follow through with [buyers' lender] and obtain a full pre-approval. Those mean more to listing agents and sellers than a pre-qualification. Also, be able to show proof of funds to close in a liquid form. In other words, your entire down payment, plus about 2%-3% for closing costs, should be readily available on a page or two from a bank or financial institution.
- Most listings are added to the mls Tuesday, Wednesday or Thursday. We can check every day, and if something is appealing, get in before the open house. [Of course, this requires that you use a Realtor in your home search. Just saying - ed.] And also, not all homes are open every weekend. This way, you won't miss anything.
- ...[Adjacent areas] to your [dream location]...may be worth considering. [They may]...have great housing stock, and prices might be coming down. It might be worth considering. Perhaps you'll let me give you a tour sometime...
Anyway, please call me with any questions and know that I'm here to help."
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A not-so-open letter to potential buyers