Why do buyers offer $100,000-$200,000 over the list price?
- The sellers and listing agents aren’t demanding it.
- The home isn’t priced $100,000-$200,000 under value.
- Half the homes are selling for list price or under.
- There will be others for sale.
There isn’t a threat of transparency either – every listing agent (besides me) does blind bidding, and then just takes the highest offer. It would be understandable if there were rounds and rounds of open bidding and the buyers’ ego kicked in because they KNEW they had to out-bid everyone else to win.
But with blind bidding, you don’t know anything about the other offers (if any).
The extended frenzy is causing buyers to voluntarily sacrifice hundreds of thousands of extra dollars in trade for the hope of ending their frustration – and if they still lose, then they offer even more next time!
The frustration builds over time, and buyers go through a fairly predictable sequence:
Early-on: I’m not going to play that game – I’m not desperate.
After losing 2-3 houses: These people are nuts.
After losing 4-5 houses: Ok, this is ridiculous. I gotta get this over with.
The biggest problem is that it seems there are always people with more horsepower who started the process earlier and, as a result, are MORE frustrated than you.
Once buyers reach the peak frustration level and end up winning a house, they are left in disbelief with the one universal thought: “Oh, what have I done?”
It becomes obvious that buyers are paying tomorrow’s prices today, but they come to terms with it later because there are enough other reasons to buy this house that paying the frustration fee gets forgotten.
If overpaying is part of the environment, what can a buyer do?
- Get to the peak frustration level quickly, and/or just buy the first house you see.
- If you are going to overpay, then insist on buying a superior home.
- Only buy an inferior home if the defects can be fixed with money.
You will have a 15-minute tour to size up the home and make decisions that will affect the rest of your life.
You’d be crazy to attempt that without a solid, experienced agent to assist you!
Yet, even with all this pent-up frustration among buyers, it doesn’t occur to listing agents to go back to all the other bidders and give everyone a chance to overpay.
Get Good Help!