Why You Should Think About Listing Prices Like an Auction’s Reserve Price

Dated: March 29 2021

Views: 348

Why You Should Think About Listing Prices Like an Auction’s Reserve Price | MyKCM

For generations, the homebuying process never really changed. The seller would try to estimate the market value of the home and tack on a little extra to give themselves some negotiating room. That figure would become the listing price of the house. Buyers would then try to determine how much less than the full price they could offer and still get the home. The asking price was generally the ceiling of the negotiation. The actual sales price would almost always be somewhat lower than the list price. It was unthinkable to pay more than what the seller was asking.

Today is different.

The record-low supply of homes for sale coupled with very strong buyer demand is leading to a rise in bidding wars on many homes. Because of this, homes today often sell for more than the list price. In some cases, they sell for a lot more.

According to the Home Buyers and Sellers Generational Trends reportjust released by the National Association of Realtors (NAR), 45% of buyers paid full price or more.

You may need to change the way you look at the asking price of a home.

In this market, you likely can’t shop for a home with the old-school mentality of refusing to pay full price or more for a house.

Because of the shortage of inventory of houses for sale, many homes are actually being offered in an auction-like atmosphere in which the highest bidder wins the home. In an actual auction, the seller of an item agrees to take the highest bid, and many sellers set a reserve price on the item they’re selling. A reserve price is the minimum amount a seller will accept as the winning bid.

When navigating a competitive housing market, think of the list price of the house as the reserve price at an auction. It’s the minimum the seller will accept in many cases. Today, the asking price is often becoming the floor of the negotiation rather than the ceiling. Therefore, if you really love a home, know that it may ultimately sell for more than the sellers are asking. So, as you’re navigating the homebuying process, make sure you know your budget, know what you can afford, and work with a trusted advisor who can help you make all the right moves as you buy a home.

Bottom Line

Someone who’s more familiar with the housing market of the past than that of today may think offering more for a home than the listing price is foolish. However, frequent and competitive bidding wars are creating an auction-like atmosphere in many real estate transactions. Let’s connect so you have the best advice on how to make a competitive offer on a home in our local market.

Blog author image

Jason Merritt

Client-First Philosophy! What does this mean for you? It means keeping myself accessible so that I can respond quickly to your needs It means being a good listener as well as a good communicator. My C....

Latest Blog Posts

What’s Causing Ongoing Home Price Appreciation?

What’s Causing Ongoing Home Price Appreciation?If you’re thinking about making a move, you probably want to know what’s going to happen to home prices for the rest

Read More

Wondering Where You’ll Move if You Sell Your House Today?

Wondering Where You’ll Move if You Sell Your House Today?If you put a pause on your home search because you weren’t sure where you’d go once you sold your house, it might be a 

Read More

Think Home Prices Are Going To Fall? Think Again

Think Home Prices Are Going To Fall? Think AgainOver the last two years, the rate of home prices appreciated at a dramatic pace. While that led to incredible equity gains for homeowners,&

Read More

Don’t Believe Everything You Read: The Truth Many Headlines Overlook

There are a lot of questions right now regarding the real estate market as we head into 2022. The forbearance program is coming to an end and mortgage rates are beginning to rise.With all of this

Read More