Understanding pricing in the Irvine Real Estate market

[financeguy_IHB]

I’ve seen a lot of instances in Irvine, where a foreclosure or short sales hits the market and it gets multiple offers on it within a week. What I don’t understand is why it is priced “so low” to begin with. I mean if the selling agent lists a 3br SFR in Westpark at 600K, and gets multiple offers immediately, why not list it at 650K to begin with.

I just don’t understand why the market does not behave normally. I’m not talking about the lack of inventory (low supply), which has been discussed here. That’s a completely separate issue. I’m talking about listing a property were supply meets demand, not where demand exceeds supply (low price).

It’s just frustrating that whenever I go to see a property I like, it already has offers on it before the weekend. Sometimes they don't even have pictures up yet, and they get offers in. What gives?

 

[LoudRoar_IHB]

 

[asianinvasian_IHB]

I’ve seen a lot of instances in Irvine, where a foreclosure or short sales hits the market and it gets multiple offers on it within a week. What I don’t understand is why it is priced “so low” to begin with. I mean if the selling agent lists a 3br SFR in Westpark at 600K, and gets multiple offers immediately, why not list it at 650K to begin with.

I just don’t understand why the market does not behave normally. I’m not talking about the lack of inventory (low supply), which has been discussed here. That’s a completely separate issue. I’m talking about listing a property were supply meets demand, not where demand exceeds supply (low price).

It’s just frustrating that whenever I go to see a property I like, it already has offers on it before the weekend. Sometimes they don't even have pictures up yet, and they get offers in. What gives?

Have you ever used eBay? Same thing. Items with no reserve and lower starting prices end up selling for more.

 

[financeguy_IHB]

Items with no reserve and lower starting prices end up selling for more.

If that's the case, then why doesn't everyone do that, in all markets? Price all listings lower so it starts a biding war. Are there as many bidding wars happening in other markets, outside of the IrvineNewport area?

 

[asianinvasian_IHB]

Items with no reserve and lower starting prices end up selling for more.

If that's the case, then why doesn't everyone do that, in all markets? Price all listings lower so it starts a biding war. Are there as many bidding wars happening in other markets, outside of the IrvineNewport area?

Because there's risk. It's no guarantee people will bid prices up.

 

[SoCal78_IHB]

Because there's risk. It's no guarantee people will bid prices up.

What risk? The seller is not obligated to accept an offer even if it's above their (falsely-low) asking price.

 

[awgee_IHB]

Because there's risk. It's no guarantee people will bid prices up.

What risk? The seller is not obligated to accept an offer even if it's above their (falsely-low) asking price.

Very few people know that.

 

[rickhunter_IHB]

In theory it should be the same. Listing it low or listing it high, the house should end up selling to the highest bidder. But you're dealing with multiple homes selling, buyers making multiple offers on different homes, etc. so in fact, it is like ebay.

As for other markets not doing it, you have crappy stuff selling on ebay that never gets a bid, they keep reposting and lowering their asking price. Remind you of something?

Because there's risk. It's no guarantee people will bid prices up.

What risk? The seller is not obligated to accept an offer even if it's above their (falsely-low) asking price.

 

[trip.threat_IHB]

Items with no reserve and lower starting prices end up selling for more.

If that's the case, then why doesn't everyone do that, in all markets? Price all listings lower so it starts a biding war. Are there as many bidding wars happening in other markets, outside of the IrvineNewport area?

Because there's risk. It's no guarantee people will bid prices up.

A few years back I bid on a granite countertop for a standard bathroom sink for $1.50. It slipped under everyone else's radar because that's what I paid for it

 

[Cuatro_IHB]

In the case of short sales, agents can't begin the short sale approval process with the bank without an offer in hand (it doesn't matter what the offer is...the bank will start with any offer...but they will ignore packages submitted without an offer). Agents price their listings way low to get an offer in AS FAST AS POSSIBLE. Then they can submit the file to the bank to get the tedious process started while the market forces take over and subsequent offers come in closer and closer to market.

That's why active, backup, and pending listings are useless in determining present values. They're often times 20-30% below reality. You have to look to closed sales.

 

[usctrojanman29_IHB]

In theory it should be the same. Listing it low or listing it high, the house should end up selling to the highest bidder. But you're dealing with multiple homes selling, buyers making multiple offers on different homes, etc. so in fact, it is like ebay.

As for other markets not doing it, you have crappy stuff selling on ebay that never gets a bid, they keep reposting and lowering their asking price. Remind you of something?

Because there's risk. It's no guarantee people will bid prices up.

What risk? The seller is not obligated to accept an offer even if it's above their (falsely-low) asking price.

What you bring in by listing something for a lower than market price is buyer emotion and frenzy will may cause people to get emotionally tied to that thing and overbid for it as it sorta becomes a competition. Perception becomes reality (i.e. if more people are bidding on it then it may be perceived to have a higher value to some people). Psychology 101.

 

[optimusprime_IHB]

In theory it should be the same. Listing it low or listing it high, the house should end up selling to the highest bidder. But you're dealing with multiple homes selling, buyers making multiple offers on different homes, etc. so in fact, it is like ebay.

As for other markets not doing it, you have crappy stuff selling on ebay that never gets a bid, they keep reposting and lowering their asking price. Remind you of something?

Because there's risk. It's no guarantee people will bid prices up.

What risk? The seller is not obligated to accept an offer even if it's above their (falsely-low) asking price.

What you bring in by listing something for a lower than market price is buyer emotion and frenzy will may cause people to get emotionally tied to that thing and overbid for it as it sorta becomes a competition. Perception becomes reality (i.e. if more people are bidding on it then it may be perceived to have a higher value to some people). Psychology 101.

Exactly! Once you put your feet on the dance floor...you can't help but DANCE shall we say. No matter how foolishly you will look.

 

[awgee_IHB]

Optimus - Have you looked at the Panda Challenge lately?

 

[freedomCM_IHB]

In the case of short sales, agents can't begin the short sale approval process with the bank without an offer in hand (it doesn't matter what the offer is...the bank will start with any offer...but they will ignore packages submitted without an offer). Agents price their listings way low to get an offer in AS FAST AS POSSIBLE. Then they can submit the file to the bank to get the tedious process started while the market forces take over and subsequent offers come in closer and closer to market.

That's why active, backup, and pending listings are useless in determining present values. They're often times 20-30% below reality. You have to look to closed sales.

I actually have this data in my costa mesa sample. I don't have time to analyze it right now, but offhand I would say that this isn't true in general.

There are occasional cases where the completed short sale is bid up 30%, but I would guess that 0% to 10% is most typical.

 

[Geotpf_IHB]

In the case of short sales, agents can't begin the short sale approval process with the bank without an offer in hand (it doesn't matter what the offer is...the bank will start with any offer...but they will ignore packages submitted without an offer). Agents price their listings way low to get an offer in AS FAST AS POSSIBLE. Then they can submit the file to the bank to get the tedious process started while the market forces take over and subsequent offers come in closer and closer to market.

That's why active, backup, and pending listings are useless in determining present values. They're often times 20-30% below reality. You have to look to closed sales.

I actually have this data in my costa mesa sample. I don't have time to analyze it right now, but offhand I would say that this isn't true in general.

There are occasional cases where the completed short sale is bid up 30%, but I would guess that 0% to 10% is most typical.

I suspect most of the times this happens, the house never sells and is eventually foreclosed and turns into an REO, usually at a more realistic price. I saw one case out here in Riverside where three houses in a row were for sale. The first two were short sales listed at $80k, the third was a REO listed at $130k. THEY WERE THE SAME FLOOR PLAN! (And a bad floor plan, too-they had two baths, but they were right next door to each other off the hall. The first door was a bathroom, and then the second door was a bathroom.) The REO price was where the market was.