A few years ago in midst of the real estate frenzy, we were getting multiple offers on properties. Buyers were bidding against each other for homes and many homes sold above asking price.
The perception was that you had better buy now or you were going to miss out. Get on the bandwagon.
As you know, many people did and subsequently lost their homes because the market was extremely overheated. One comment heard more than once was that the Realtors were the cause of the frenzy and they were driving prices up.
How far from the truth?
We do not hear that anymore because people are hopefully more educated on the economic forces that drive prices. Certainly, if Realtors could influence pricing, no doubt they would be doing that today.
As it has been for eons, supply and demand control market pricing (i.e. the Holland tulip bulb debacle of the 1600s) and government intervention that creates false markets can, as we have seen, distort economic law.
Additionally, consumers need to be aware of how irresponsible and uninformed journalism can affect pricing and influence people’s decision-making process.
Now as far as getting on the bandwagon, it is happening again only the scenario is different.
Here is an example of public perception of a good deal. A home was listed for $225,000 (a short sale) and could not attract a buyer. Great home, great price, good location!
A few months later, the home was foreclosed on and then put back on the market. It became a REO property (bank-owned foreclosure). The home was subsequently listed by the bank at $249,000 and received an offer shortly thereafter.
One can only suspect that the notoriety of the “deals” that are available on foreclosures and bank-owned properties permeated a contract to be received in a short time frame.
While there are many great “deals” on short sales and foreclosures, the moral of the story is, there may be better “deals” on non-bank-owned or short-sale properties. If you are a buyer, beware of the trap of saying you only want to see short sales and bank-owned properties. As illustrated above, by putting yourself in a short-sale/bank-owned box, it could prevent you from seeing as good or better valued property that is available in the market.