Why the range in selling price?

[AgentEL]

I've been looking at listings for condos. The majority of the time I see that the owner is "entertaining offers between $350,000 and $385,000." Is there something I'm missing? What's the point of putting $385K? A buyer would probably offer the $350K at first and go higher.

 

[flamingelephant]

because you could offer 350k, someone else offer 360k and if the selled didn't want to counter the bids he'd just accept the other one.....

personally, I think its dumb to do it this way.... set an asking price and let the offers come in... counter if you want to or reject outright.....

I sold my house a few months ago and got offered asking! made me happy!

 

[AgentEL]

is it normally this way? Do buyers only have one shot at a bid or are they allowed to counter-offer? also, does asking price == high end of range?

 

[GasX]

That's just BS.

In a seller's market, you have an asking price, multiple offers come in and if you are lucky get over your ask.

In a buyer's market, you have an asking price and you hope you get offers.

Sellers/agents trying b.s. tricks like sealed bids and price ranges are just clueless people trying to do something different.

 

[timswim78]

Originally posted by: AgentEL
is it normally this way? Do buyers only have one shot at a bid or are they allowed to counter-offer? also, does asking price == high end of range?

I put in a bid on my house, and the people counter-offered. I still did not like their price, and we met in the middle.

You will see that especially for first time home buyers, your type of mortgage is very important. Other people put in higher offers than me, but they did not have a conventional mortgage. They may have had FHA/VA or something like that.

Also, it is important to get pre-approved for a mortgage if you are ready to buy. Many real estate agents will not look at a contract unless you show that you have cash or have been approved for financing.

 

[Vic]

The current Fannie Mae/Freddie Mac conforming loan limit is $359,650 (for single family residence). $385k would be that plus roughly 10% down. A higher loan amount would require either Jumbo, ALT, or non-conforming pricing and qualifying, which would be higher and possibly more difficult (especially with a condo). This is part of the reasoning.
The other is that, with the lower price range, the sellers are hoping to attract more offers. If they just put out $385k as the asking price, they might lose offers from those prospective buyers who are only approved to the conforming limit. This way they can attract and possibly entertain those offers that they might otherwise not get at all. They also hope it might start a bidding war.

edit: the current FHA/VA loan limit for SFR is $312,895.

edit2:I would seriously re-consider paying $350k+ for a condo in that area if I were you. Current "luxury" apartment rents in that area average $1500/mo. The current best case scenario for a fully-amortized fixed rate mortgage including taxes, insurance, and HOA dues would be roughly $2500/mo., an additional $12k per year. Taking into account the benefit of the mortgage tax deduction, the first year's interest would be $20,800 plus (guessing here) roughly $3k per year in property taxes (which are tax deductible), for a total of (rounding) $24k. Assuming 28% tax bracket minus standard single deduction of $4850, you would only reduce your taxes by roughly $5362, for a net first year loss against renting of roughly $6600. Sure, the property could continue to appreciate, but given the fact that recent past appreciation has been so dramatic and that currently available financing is already pressed to the limit to appove prospective buyers at the current offering prices, I would not bet my entire future on it.

 

[AgentEL]

Originally posted by: Vic
The current Fannie Mae/Freddie Mac conforming loan limit is $359,650 (for single family residence). $385k would be that plus roughly 10% down. A higher loan amount would require either Jumbo, ALT, or non-conforming pricing and qualifying, which would be higher and possibly more difficult (especially with a condo). This is part of the reasoning.
The other is that, with the lower price range, the sellers are hoping to attract more offers. If they just put out $385k as the asking price, they might lose offers from those prospective buyers who are only approved to the conforming limit. This way they can attract and possibly entertain those offers that they might otherwise not get at all. They also hope it might start a bidding war.

edit: the current FHA/VA loan limit for SFR is $312,895.

edit2:I would seriously re-consider paying $350k+ for a condo in that area if I were you. Current "luxury" apartment rents in that area average $1500/mo. The current best case scenario for a fully-amortized fixed rate mortgage including taxes, insurance, and HOA dues would be roughly $2500/mo., an additional $12k per year. Taking into account the benefit of the mortgage tax deduction, the first year's interest would be $20,800 plus (guessing here) roughly $3k per year in property taxes (which are tax deductible), for a total of (rounding) $24k. Assuming 28% tax bracket minus standard single deduction of $4850, you would only reduce your taxes by roughly $5362, for a net first year loss against renting of roughly $6600. Sure, the property could continue to appreciate, but given the fact that recent past appreciation has been so dramatic and that currently available financing is already pressed to the limit to appove prospective buyers at the current offering prices, I would not bet my entire future on it.

whoa. a lot of good info in there. thanks.