Price mirage

Price MirageA price mirage happens when the list price of a home for sale is far below what the sale price will be. Right now this is a very common strategy from listing agents and sellers, and buyers need to know about it.

Those homes are not really available to many of the home buyers who are excited about them and think that it will sell at or only 10% or so above list price. The gap is much higher than that, particularly if a property sells in the first two weeks. We sometimes hear of homes selling 20% or more over list price.

What is a price mirage?

Sometimes the listing agent and sellers very intentionally deeply underprice a property by 25% 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).

The articles about homes selling for $1 million or more over list price are becoming more common. Recently we were working on an offer along those lines, but the house sold for far more than that, about 49% over list price. It’s staggering.

Often the home is priced a a little 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 common and has been for years. That’s not a price mirage because the list price wasn’t tremendously less than what appeared to be the probable sale price.

What we are seeing now is along the same lines, but with lower list prices and higher sale prices. Buyers cannot look at the list price and know if they can afford the property or not. They wonder if it’s underpriced by 10%, 30%, or even 50%?

What should home buyers do about cheap looking homes that might be a price mirage?

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