Let’s talk about the listed price in real estate.
What is the cardinal sin when purchasing anything? You know it—paying full price. It never happens, right? I mean, the buyer always deserves something off the listed price. Wouldn’t it be embarrassing if anyone found out you couldn’t negotiate at least a buck or two off whatever the price is?
When I worked for my family business many years ago, we sold truck and auto accessories to both the retail public and wholesale businesses. We actually had five different pricing levels from highest dollar amount to lowest: List, Trade, Dealer, Car Dealer, and Jobber. Depending on who you were or who you worked for, you’d get a certain price. But nobody, I mean nobody, paid List price. The retail public paid Trade price, or sometimes even Dealer price. But never List price.
But depending on market conditions, such as we have now in the greater Houston market with very low housing inventory and historically low interest rates, buyers are having to pay at, or even above, the listed price—AND THAT’S OKAY!
Buying a home is NOT the same as buying a car or an item on e-Bay. Because those items do not involve a mortgage lender lending up to hundreds of thousands of dollars on their purchase, their value is determined by how much the buyer and seller are willing to agree on. With a house purchase, the lender has a much greater risk and therefore requires the house to appraise for a fair market value for the home before they will commit to loaning the funds for purchase. So the sales price is not just what the buyer and seller agree on. The property must appraise at a value determined by similar homes sold near that property. That’s the job of an appraiser.
Here’s the bottom line—in a “seller’s market” where there’s a low inventory of homes available for purchase and interest rates allow more people to qualify for loans at each price level, the competition among buyers increases and will drive up the market price of homes. I’ve had at least three transactions in recent months where my buyer clients paid $7,000 and even $13,000 over the MLS listed price. And they were very happy to get the deal!
So don’t be afraid when your Realtor® recommends offering more than the listed price on a home you love. Chances are there are four or five other buyers who love it, too, and are willing to offer a price over the listed price. Keep in mind you have some protection against overpaying because, if the appraisal comes in below the sales price, you can either renegotiate the sales price or terminate the contract and have your earnest money refunded to you.
So let’s get you pre-qualified or pre-approved for a home loan and then let’s go shopping for your next home. Call me, Good News Bob, today!