Just a quick post to warn prospective home buyers that in many cases, the sale price is going to be far above the list price right now, and that’s what I call a price mirage. It’s not really available to many of the home buyers who are excited about it.
What is a price mirage?
Sometimes the listing agent and sellers very intentionally deeply under-price a property by 10-15% or more (to see how far the market will bid it up). I can think of a few local Realtors who are well aware that most of the buyers they attract with artificially low prices cannot truly afford their listings. But those buyers will crowd the open house and make offers which are low (a waste of many people’s time).
Other times, the home is priced a hair low, but so many buyers pounce that the price gets driven up and out of reach, and that can surprise everyone. In these cases, let’s say a house looks like it should be worth $1,035,000, but the home goes on the market at $1 mil even, but buyers are so desperate that it gets many offers and sells for a little over $1.1 mil. That is happening a lot right now.
What should home buyers do about cheap looking homes that might be a price mirage?
When you are shopping, please be aware that sometimes the house may be listed just below a price point (such as $1 million, with a list price of $998,000) even when the home is clearly worth much more (such as the $1 mil house being worth $1.3 mil). I frequently see homes placed at or a little under major price points such as $1 or $2 million, even if the property is worth a couple of hundred thousand – or more – higher than that. So first, pay attention to price breaks!
Secondly, have your buyer’s agent help you with the comparable solds and market activity to determine the probable buyer’s value. This is one place where you really want your own agent in your corner (rather than just working with whoever the listing agent happens to be).
Often, the ultimate sale price (and terms) will be influenced in large part by the number of offers presented. Your buyer’s agent can assist you in trying to decipher that type of info so you can get a better idea of the likely competition.
It is frustrating, it’s a tease, and it’s a mirage. It is not the likely sales price – it’s a teaser to get you in the door.
It’s best to remember that old adage: “if it looks too good to be true, it probably is”. That is precisely what happens with a price mirage.