Don’t worry about the list price of a home; you may be getting a better deal paying more.
A lot of buyers get hung up on list price and that they are not getting a deal if they pay the list price or even more than list price. Bank owned homes and short sales tend to list lower than normal home listings. The bank owned homes will do this to cause a multiple bid situation and push the price up. Since it is against the law for one offer to know what the other offer is, this put the bank in a better position since the offers are only going to be able to guess what the other offer is at.
I had a couple that was looking for a house and I found them one that was in their price range that was bank owned. The bank had put new carpet in the home. The home was listed around the $150,000 range. There were several buyers that made offers. The bank called for a highest and best offer. My clients could and wanted the house. They paid between 15-20k over list to get the house. Most people would say that they are crazy for paying over list. When I did a CMA (competitive market analysis) on the home, I found that most homes were selling for $200,000. They still got a deal paying more than list.
With short sale homes the agent is under a time frame crunch since the bank wants to foreclose if they don’t get it done. With Short sales I will drop the price very quickly to get an offer. Does that mean that the bank will accept the price, maybe? Short sales are funny when it comes to the approval price. I have seen a $150,000 home be countered back at $250,000 and I had to start all over with the bank to get them to understand the value that the market was showing at the time.
I have seen other short sale homes were the bank has come back an accepted the offer. Others I have seen them counter 10-20k higher. If it is the right home for you, 10-20k is not going to break your payment and if it does your loan officer is not doing a very good job.
The key to understanding list price is finding the right home and having the Realtor do a CMA to see what comparable homes are selling for. Paying over list price may get you a better deal than you think.
In the next post we will discuss what is getting a deal on a home.