Your new next door neighbors introduce them selves. In the course of the conversation, they say, “We paid the list price and saved money at the same time.”
It sounds crazy, I know. Well, at least it seems counter intuitive. How does a home buyer SAVE money by paying the list price ? Isn’t the idea that you should try and get the most off the listing price in order to show you got the best “deal” you could as a buyer ?
No, not really.
In the above scenario, an actual client was involved. They were looking in a very desirable municipality. Big time desirable. The house was just listed in the morning at $295,000. We looked at it that afternoon and had it under agreement that evening.
For $295,000. So, where is the savings ?
Both my clients and I could easily see that this house was “under priced”. Given its’ features, condition and location, it easily could have been listed for $335,000. It was easily worth $320-$325,000. Whatever the motivation of the sellers, it was obvious they wanted to A) sell the house quickly and/or B) generate a bidding war.
Experience told me that we needed to avoid the latter. So, I recommended to our clients to make the sellers an offer they could not refuse. Offer the list. Beat anyone else to the punch and hopefully avoid a bidding war. My clients were 20+% down and had not house to sell.
The sellers were excited and receptive to the offer. The only issue to be ironed out with the sellers turned out to be closing date. That evening, after all the kinks were worked out, the listing agent said to me,” Well, I am glad this is done. Now I can call the 9 (Yes NINE) other agents who had showing scheduled for tomorrow that they do not need to come.”
It is not a stretch to think that at least ONE and perhaps more of those 9 buyers would have desired to have made an offer. Bingo. Bidding War. Thus, while our clients may have still secured the house, the likelihood is that, under that scenario, the ultimate purchase price would have been MORE than the list price of $295,000. So, they may have paid $305,000-$310,000. That is still within the range of value. However, it is still $10,000-$15,000 MORE than they paid.
So, by paying the listing price, our clients SAVED perhaps $10-$15,000. Not bad.