Are banks in Kansas City pricing foreclosures low to spark bidding wars?
I have noticed that banks have adopted a new strategy regarding the pricing of foreclosed homes for sale. The new strategy may be to list them low to generate lots of buyer interest, which results in multiple offers and a bidding war for the property.
In some of my recent dealings my clients have been up against as many as eight other bids on a home and in some cases the homes sold for 10 to 15% over the listing price. How is that possible? Isn’t this a “buyer’s market”?
The strategy is brilliant, and it is working!
Here’s a typical scenario of how this new strategy works; a home’s true market value is $250,000 but at this price the bank is likely to get offers that range from $200,000 to $220,000. The bank will be lucky to get the home sold for $220,000 or $30,000 below market value.
With their new strategy of pricing the foreclosed home below market value, they list the selling price of the home at $210,000 and buyers come out of the woodworks thinking that they may be able to bid $200,000 for the home and get the deal done. But with several offers on the table ranging from $190,000 to $210,000, the listing agent for the bank informs all the bidding buyers that there are multiple offers for the property, to please make what they believe to be their best offer and then the bank will decide which one suits them best.
If you are one of the bidding buyers and really want to buy the home, you are going to make an offer that comes close to meeting the real market value of the home or $250,000. The home ends up selling for $240,000 or nearly 15% over the listing price and more than what it would have sold if the bank listed it at market value.
Hard to believe? Not really, that is what the new Kansas City Real Estate marketplace looks like, and homebuyers need to know what a home is really worth when they make an offer, or risk losing the opportunity to buy it to others that will. This may mean offering the asking price and never looking back.
So does this mean buyer’s are paying more than they should? No, while most buyers struggle with the thought of paying substantially over what a home is listed for you have to keep in mind the value of the home. In the example above the buyer still got the home for under fair market value.
The Real Estate marketplace in Kansas City, Overland Park and the entire Metro area has changed and knowing the new rules of the game has become increasingly important.