Author Topic: Not accepting offers at asking price should be illegal  (Read 5169 times)

KateFIRE

  • 5 O'Clock Shadow
  • *
  • Posts: 72
Not accepting offers at asking price should be illegal
« on: May 01, 2021, 10:07:42 PM »
I just want to rant. It seems to me that there is some strategy to pricing low. It puts the seller in control and gets the buys to waive appraisals and inspections. Itís raising home prices everywhere and there are no consequences to this strategy because they donít have to sell the house to you even if you offer asking price and they have no other offers! Forcing the sale if they have no other offers and they refuse to sell would make sellers price higher and the power would come back to the buyer. People donít waive appraisals and inspections when they offer under asking price.

We have offered on 6 homes in Colorado. We have offered above asking price on every house. On Wednesday we offered on a house $11k over asking price. It had just been listed, but the buyers wanted to wait until Monday to collect offers all weekend so they didnít accept our offer. Our offer expired, but I bet they told the other buyers ďwe have another offer above asking priceĒ. This is a white lie because our offer expired!

Also every house that we have offered on we offer on twice, once the original offer and again after our realtor hears about how many offers they have over asking price and ďI donít feel comfortable saying, but significantly higherĒ offers. Then the realtor says ďdo you want to offer again?Ē, but what if these other offers are made up? They donít show you the other offers and the winning offer is not required to buy the home or pay anything if they decline after winning. There could be some major fraud with this system! You go to jail for years for stealing $10k from a store, but I bet there are plenty of realtors who manipulate bidding wars to the tune of thousands and have no consequences.

Another strategy with pricing low is that if they donít get the bidding war that they want, sellers can relist at a higher price. Relisting higher makes the home seem desirable, like you had so much attention you had to relist higher! Instead of lowering the price which says ďwe are having trouble selling, you can offer less than askingĒ. So listing low and getting the bidding war is a power move for sellers, but also leads to the potential for lying realtors and fraud.

Malcat

  • Walrus Stache
  • *******
  • Posts: 6324
Re: Not accepting offers at asking price should be illegal
« Reply #1 on: May 01, 2021, 10:22:31 PM »
Of course there is a strategy to pricing low.

However, where I live, people usually price low if they are holding offers. Meaning, they'll list for a limited time and the owners won't see any offers until the end of that time, at which point they see all the offers at once.

They usually price 15% below what they want, and then the hotter the market, the higher over asking the top offers will be.

Hot markets encourage lying and fraud regardless of whether or not a listing is listed low. That's just the nature of insane markets, crazy shit starts happening.

Hot markets suck for buyers, they just do. I'm sorry you're stuck trying to buy at an epically bad time. I know it's frustrating.

KateFIRE

  • 5 O'Clock Shadow
  • *
  • Posts: 72
Re: Not accepting offers at asking price should be illegal
« Reply #2 on: May 01, 2021, 10:33:24 PM »
Do you feel that there is something that could be done to cut down on the fraud? What about making offers visible to all parties?

Yes, Iíll admit that Iím sad that we keep losing. We are a family of 5, 2 adults working + 3 kids, and we canít seem to buy after selling our house a few months ago. We are strongly considering giving up on living in Colorado and moving to Texas. I guess we are too stubborn to overpay, which fills us with regret. Now we are considering moving everyone to a new community and new schools. Itís really sad.
« Last Edit: May 02, 2021, 12:04:48 AM by KateFIRE »

secondcor521

  • Magnum Stache
  • ******
  • Posts: 3767
  • Age: 52
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: Not accepting offers at asking price should be illegal
« Reply #3 on: May 01, 2021, 11:06:53 PM »
Do you feel that there is something that could be done to cut down on the fraud? What about making offers visible to all parties?

Yes, Iíll admit that Iím sad that we keep losing. We are a family of 5, 2 adults working and we canít seem to buy after selling our house a few months ago. We are strongly considering giving up on living in Colorado and moving to Texas. I guess we are too stubborn to overpay, which fills us with regret. Now we are considering moving everyone to a new community and new schools. Itís really sad.

Someone somewhere else mentioned that as part of their escalation clause that the seller had to show them a copy of the other offer.

Around here it used to be that earnest money was actually held in escrow when an offer was made.  Then if an offer was accepted and then the buyer backed out or reneged for a non-legitimate reason (as determined by a court or arbitration in case of disagreement) then the seller got the escrow funds.  I understand now that is not necessarily how things are done nowadays and that the earnest money is only escrowed in case of an accepted offer.

I agree it's frustrating to be a buyer.  My DS26 will be a FTHB soon, and the market here is as hot as it has ever been.  On the one hand, I don't want him to overpay in a hot market.  On the other hand, I don't want him to be forever chasing his entry into home ownership.  Lately I think my advice to him will be to save up, make offers he feels good about, be patient and keep at it until it works out.

Psychstache

  • Handlebar Stache
  • *****
  • Posts: 1193
Re: Not accepting offers at asking price should be illegal
« Reply #4 on: May 02, 2021, 12:04:15 AM »
Do you feel that there is something that could be done to cut down on the fraud? What about making offers visible to all parties?

Yes, Iíll admit that Iím sad that we keep losing. We are a family of 5, 2 adults working and we canít seem to buy after selling our house a few months ago. We are strongly considering giving up on living in Colorado and moving to Texas. I guess we are too stubborn to overpay, which fills us with regret. Now we are considering moving everyone to a new community and new schools. Itís really sad.

LOL if this is how you fell sure hope you are not considering any major metro area in Texas. Same issues you describe but the weather sucks.

KateFIRE

  • 5 O'Clock Shadow
  • *
  • Posts: 72
Re: Not accepting offers at asking price should be illegal
« Reply #5 on: May 02, 2021, 12:16:08 AM »
I am a long time Texan before we moved to Colorado, so I can say with confidence that you get more house for your money in metro Texas than in metro Colorado.

onecoolcat

  • Pencil Stache
  • ****
  • Posts: 538
  • Age: 34
  • Location: SoFla
Re: Not accepting offers at asking price should be illegal
« Reply #6 on: May 02, 2021, 12:38:13 AM »
Everyone is chasing a limited supply of homes right now.  There will be a correction eventually its a sellers market for the foreseeable future.

AccidentialMustache

  • Bristles
  • ***
  • Posts: 479
Re: Not accepting offers at asking price should be illegal
« Reply #7 on: May 02, 2021, 06:49:41 AM »
We're looking to sell a home in flyover country and hearing similar things from our realtor. Buyers they are working with are in multiple-offer-with-escalation-clauses and still not winning a home. This only got bad in the last few months and is largely a supply problem. There are ~20% or less of the normal homes on the market. If you need one, you pay or you don't get it.

It is very strange, because we sailed through the 2008/2009 crash with barely a blip. No drop, no recovery. House prices have never been exploding here (too much farmland to build on keeps the price down), but the housing market isn't capable of building new supply on the timeframe of constrained used supply due to covid.

clarkfan1979

  • Handlebar Stache
  • *****
  • Posts: 2318
  • Age: 41
  • Location: Pueblo West, CO
Re: Not accepting offers at asking price should be illegal
« Reply #8 on: May 02, 2021, 07:26:32 AM »
Of course there is a strategy to pricing low.

However, where I live, people usually price low if they are holding offers. Meaning, they'll list for a limited time and the owners won't see any offers until the end of that time, at which point they see all the offers at once.

They usually price 15% below what they want, and then the hotter the market, the higher over asking the top offers will be.

Hot markets encourage lying and fraud regardless of whether or not a listing is listed low. That's just the nature of insane markets, crazy shit starts happening.

Hot markets suck for buyers, they just do. I'm sorry you're stuck trying to buy at an epically bad time. I know it's frustrating.

I realize that you are ranting and it is frustrating. However, I would try to come up with a strategy. I agree that lying and fraud are more likely to occur in hot markets. Listing price doesn't seem relevant.

I bought a foreclosure in June 2018. The bank listed it too low on purpose. However, I was able to use this too my advantage. In psychology, people will anchor to the list price, even though the list price has no real value.

The median price for the neighborhood was around 800K. The bank listed the home for 549K. The house needed about 100K worth of work or 50K if I did some of the work myself.

We offered 603K, which was 10% over asking. After all bids were collected we were told that there were 9 offers total and we were #2. After one week the highest bidder lost interest and the deal went to us.

The house appraised for 615K "as is". We made 50K of necessary repairs and it was immediately worth 750K. After 3 years of appreciation, it's now worth around 950K. The median price of the neighborhood is now around one million.

In the end, I was thankful the bank listed the house too low. It's pretty much the main reason why I was able to get the house. We had previously looked at around 20-25 houses for about 18 months.
« Last Edit: May 02, 2021, 07:30:47 AM by clarkfan1979 »

maizefolk

  • Walrus Stache
  • *******
  • Posts: 5676
Re: Not accepting offers at asking price should be illegal
« Reply #9 on: May 02, 2021, 07:40:01 AM »
I understand your frustration, KateFIRE. This is the second thread you've posted about not liking the way housing prices/markets work right now, at least the second one I've read. It sounds really hard.

That said, I don't think laws about listing prices are going to do anything to address the fundamental issue that lots of people with lots of money are trying to buy a limited number of houses which gives sellers a lot of power and potential buyers much less. If such a law existed, people would just list their houses for 5x as much as they hoped to sell for, and still ask people to put in whatever their "best" offer was even though all the offers would be below the asking price.

I'd just say recognize that the frustration you are feeling right now isn't the result of anyone acting unethically. Not sellers who would like to get as much money as they can for their house (wouldn't you in their place?) and not the other potential buyers who are willing to spend as much money as they can to own a house (wouldn't you in their place?). It is the result of this fundamental mismatch in supply and demand that isn't any particular person's fault, yet creates effects on how each of us lives our lives. Getting angry at the others swept up in the same supply/demand mismatch isn't going to change anyone's behavior. It will, however, make you feel worse than you already do to no particular end.

Malcat

  • Walrus Stache
  • *******
  • Posts: 6324
Re: Not accepting offers at asking price should be illegal
« Reply #10 on: May 02, 2021, 08:35:37 AM »
Of course there is a strategy to pricing low.

However, where I live, people usually price low if they are holding offers. Meaning, they'll list for a limited time and the owners won't see any offers until the end of that time, at which point they see all the offers at once.

They usually price 15% below what they want, and then the hotter the market, the higher over asking the top offers will be.

Hot markets encourage lying and fraud regardless of whether or not a listing is listed low. That's just the nature of insane markets, crazy shit starts happening.

Hot markets suck for buyers, they just do. I'm sorry you're stuck trying to buy at an epically bad time. I know it's frustrating.

I realize that you are ranting and it is frustrating. However, I would try to come up with a strategy. I agree that lying and fraud are more likely to occur in hot markets. Listing price doesn't seem relevant.

I bought a foreclosure in June 2018. The bank listed it too low on purpose. However, I was able to use this too my advantage. In psychology, people will anchor to the list price, even though the list price has no real value.

The median price for the neighborhood was around 800K. The bank listed the home for 549K. The house needed about 100K worth of work or 50K if I did some of the work myself.

We offered 603K, which was 10% over asking. After all bids were collected we were told that there were 9 offers total and we were #2. After one week the highest bidder lost interest and the deal went to us.

The house appraised for 615K "as is". We made 50K of necessary repairs and it was immediately worth 750K. After 3 years of appreciation, it's now worth around 950K. The median price of the neighborhood is now around one million.

In the end, I was thankful the bank listed the house too low. It's pretty much the main reason why I was able to get the house. We had previously looked at around 20-25 houses for about 18 months.

Are you saying I'm ranting?

I'm not ranting at all. I know about listing low because I did it myself.

I'm also not ranting about fraud in hot markets, it's just a reality of hot markets. Some agents will get caught, some won't. That's the nature of fraud.

Roland of Gilead

  • Handlebar Stache
  • *****
  • Posts: 2296
Re: Not accepting offers at asking price should be illegal
« Reply #11 on: May 02, 2021, 08:47:06 AM »
I *think* the market is going to improve, but not very soon.   Building materials are so high right now that "used" homes are actually underpriced still in some areas and there are not as many new builds going on because people are waiting for materials to come down in price.

There is a hidden high inflation going on out there which is not being reported by the government although people like Buffett acknowledge it.

https://news.yahoo.com/warren-buffett-we-are-seeing-substantial-inflation-and-are-raising-prices-220539307.html

norajean

  • Pencil Stache
  • ****
  • Posts: 566
Re: Not accepting offers at asking price should be illegal
« Reply #12 on: May 02, 2021, 08:49:24 AM »
Report fraudulent behavior to your local board of realtors.  Otherwise, get on with your purchase strategy.  Move down the price scale to where you can blow other buyers out of the water with your high bid.  Ask to see the competing offers.  Never waive appraisal or inspection.

Cranky

  • Magnum Stache
  • ******
  • Posts: 2977
Re: Not accepting offers at asking price should be illegal
« Reply #13 on: May 02, 2021, 09:10:36 AM »
Even here in flyover country, houses are selling fast with multiple offers. It is what it is. I'm glad we bought our new house last fall, for sure.

Roland of Gilead

  • Handlebar Stache
  • *****
  • Posts: 2296
Re: Not accepting offers at asking price should be illegal
« Reply #14 on: May 02, 2021, 09:26:29 AM »
It is for a different topic but they really need to raise interest rates to get a handle on this situation.   Way too much easy loan money out there which is why people can buy $800,000 homes on a $100,000 income.

jeromedawg

  • Magnum Stache
  • ******
  • Posts: 4085
  • Location: Orange County, CA
Re: Not accepting offers at asking price should be illegal
« Reply #15 on: May 02, 2021, 10:00:35 AM »
It is for a different topic but they really need to raise interest rates to get a handle on this situation.   Way too much easy loan money out there which is why people can buy $800,000 homes on a $100,000 income.

I'm very curious about this because a lot of people say that lending standards have tightened (e.g. the hair dresser making $50k can no longer take a $600k loan or whatever).
How is this situation that much different? I guess more people are putting in way higher down payments? My lender told me I could take a loan out that was at least 5-6x my salary. It only takes one bit of long term job loss to really screw things over if I were to actually take a loan that big.

jeromedawg

  • Magnum Stache
  • ******
  • Posts: 4085
  • Location: Orange County, CA
Re: Not accepting offers at asking price should be illegal
« Reply #16 on: May 02, 2021, 10:02:55 AM »
Report fraudulent behavior to your local board of realtors.  Otherwise, get on with your purchase strategy.  Move down the price scale to where you can blow other buyers out of the water with your high bid.  Ask to see the competing offers.  Never waive appraisal or inspection.

If you come in at all cash, you may not need to waive either of those. But I think YMMV depending on the location. If it's a super hot on fire market like the Bay Area or SoCal, I think the 'expectation' is that you'll still waive the appraisal, because it seems to me like there often multiple cash offers lined up...all with people very much willing to waive all contingencies :T
« Last Edit: May 02, 2021, 10:08:11 AM by jeromedawg »

Malcat

  • Walrus Stache
  • *******
  • Posts: 6324
Re: Not accepting offers at asking price should be illegal
« Reply #17 on: May 02, 2021, 10:08:28 AM »
It is for a different topic but they really need to raise interest rates to get a handle on this situation.   Way too much easy loan money out there which is why people can buy $800,000 homes on a $100,000 income.

If this is the obvious solution, then why do you think it hasn't been done?

Housing market cooling is a major priority here in Canada, but for various reasons, raising the prime rate isn't one of the approaches the government is proposing.

Psychstache

  • Handlebar Stache
  • *****
  • Posts: 1193
Re: Not accepting offers at asking price should be illegal
« Reply #18 on: May 02, 2021, 10:36:27 AM »
Everyone is chasing a limited supply of homes right now.  There will be a correction eventually its a sellers market for the foreseeable future.

No doubt, but you are still going to be getting into nonstop multi offer bidding wars down here, so that doesn't solve OPs problem.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 15574
  • Age: 63
  • Location: NorCal
Re: Not accepting offers at asking price should be illegal
« Reply #19 on: May 02, 2021, 10:40:48 AM »
Some day, when you're the seller, you'll hope for a situation like this again. Real Estate is always, always cyclical.

Paul der Krake

  • Walrus Stache
  • *******
  • Posts: 5469
  • Age: 13
  • Location: UTC-10:00
Re: Not accepting offers at asking price should be illegal
« Reply #20 on: May 02, 2021, 11:33:01 AM »
Be mad at your local government and the NIMBYs for restricting the supply of housing.

Abe

  • Handlebar Stache
  • *****
  • Posts: 2000
Re: Not accepting offers at asking price should be illegal
« Reply #21 on: May 02, 2021, 08:13:10 PM »
The government cannot force someone to sell private property if they have not been found guilty of a illegal action. An offer is just that, an offer to provide money for the house. The seller is not obligated to sell unless your contract specifically says that. The asking price is just a starting point, everyone knows that.

I think people are in bidding wars because the news is constantly yammering about record-low interest rates. It's not worth saving a few dozen (yes dozen) dollars a month on your mortgage for an unsatisfactory house. There will be other houses and honestly whatever someone is looking at that isn't being bought for them through a shell corporation isn't that unique. Something similar will show up again eventually. In the meantime it's probably a good idea to not get caught up into whatever this wave is going to crash into. I guess the difference now is that theoretically everyone over-spending on houses can afford to do so, thus it won't be a giant wave of defaults.

FINate

  • Handlebar Stache
  • *****
  • Posts: 2138
Re: Not accepting offers at asking price should be illegal
« Reply #22 on: May 02, 2021, 10:37:28 PM »
I just want to rant. It seems to me that there is some strategy to pricing low. It puts the seller in control and gets the buys to waive appraisals and inspections. Itís raising home prices everywhere and there are no consequences to this strategy because they donít have to sell the house to you even if you offer asking price and they have no other offers! Forcing the sale if they have no other offers and they refuse to sell would make sellers price higher and the power would come back to the buyer. People donít waive appraisals and inspections when they offer under asking price.

People waive appraisals and inspections to sweeten the offer. That this is happening on all cash over asking offers only shows how imbalanced the RE market is. To the extent that this doesn't happen with lower offers is more likely because of financing requirements. That is, it's coincidental rather than causal.

Besides, if this idea ever became law (not gonna happen) it still wouldn't work. Instead, sellers would list with an exceptionally high price (say 150% of approximate market value) knowing they will get a bunch of competing bellow asking offers such that the true market value is discovered without triggering an accidental forced sell for less.

As others have mentioned, the real culprit isn't individual sellers or the real estate industry. It's governments beholden to existing homeowners that have done everything in their power to stop development of new housing, usually in the name of "neighborhood character" or a faux-environmentalism that has more to do with protecting one's view of nature than actually protecting the planet.

Malcat

  • Walrus Stache
  • *******
  • Posts: 6324
Re: Not accepting offers at asking price should be illegal
« Reply #23 on: May 03, 2021, 06:55:56 AM »
I just want to rant. It seems to me that there is some strategy to pricing low. It puts the seller in control and gets the buys to waive appraisals and inspections. Itís raising home prices everywhere and there are no consequences to this strategy because they donít have to sell the house to you even if you offer asking price and they have no other offers! Forcing the sale if they have no other offers and they refuse to sell would make sellers price higher and the power would come back to the buyer. People donít waive appraisals and inspections when they offer under asking price.

People waive appraisals and inspections to sweeten the offer. That this is happening on all cash over asking offers only shows how imbalanced the RE market is. To the extent that this doesn't happen with lower offers is more likely because of financing requirements. That is, it's coincidental rather than causal.

Besides, if this idea ever became law (not gonna happen) it still wouldn't work. Instead, sellers would list with an exceptionally high price (say 150% of approximate market value) knowing they will get a bunch of competing bellow asking offers such that the true market value is discovered without triggering an accidental forced sell for less.

As others have mentioned, the real culprit isn't individual sellers or the real estate industry. It's governments beholden to existing homeowners that have done everything in their power to stop development of new housing, usually in the name of "neighborhood character" or a faux-environmentalism that has more to do with protecting one's view of nature than actually protecting the planet.

Is it?

Because our market is absolutely insane up here where I am in Canada and no one is suppressing development. It's actively being encouraged in my area.

Roland of Gilead

  • Handlebar Stache
  • *****
  • Posts: 2296
Re: Not accepting offers at asking price should be illegal
« Reply #24 on: May 03, 2021, 08:20:14 AM »

Because our market is absolutely insane up here where I am in Canada and no one is suppressing development. It's actively being encouraged in my area.

Then why is your market so insane there?  Canada has cheap lumber and a good amount of area to build.   I guess the population is concentrated in just a tiny portion though which is the main reason real estate is expensive there?

Malcat

  • Walrus Stache
  • *******
  • Posts: 6324
Re: Not accepting offers at asking price should be illegal
« Reply #25 on: May 03, 2021, 08:50:58 AM »

Because our market is absolutely insane up here where I am in Canada and no one is suppressing development. It's actively being encouraged in my area.

Then why is your market so insane there?  Canada has cheap lumber and a good amount of area to build.   I guess the population is concentrated in just a tiny portion though which is the main reason real estate is expensive there?

Yeah, like 90% of our population lives in cities, and we don't have many of those. Plus we don't just have domestic buyers, we also have foreign investors buying properties in our biggest cities.

The market is fucking bonkers at this moment though because supply dropped so much with covid. There are multiple high rises going in within a few blocks from me, but those won't do anything to cool the market right now.

People just don't want to sell right now, too many unknowns, so everyone is hunkering down.

My mom just sold a plot of land that for 95K, which she couldn't even sell for 45K a few years ago. Buyers are desperate. It's not that there isn't land, there is, but land close enough to resources is tricky to find. We don't have countless smaller communities.

minority_finance_mo

  • Pencil Stache
  • ****
  • Posts: 750
    • Minority Finance
Re: Not accepting offers at asking price should be illegal
« Reply #26 on: May 03, 2021, 09:19:37 AM »
As someone saving as a first-time homebuyer at this point in my late 20s, it's really disheartening to see the price of homes increase so significantly in the last year. Makes you feel like if you didn't get on the boat in time, you're left off the ride. I bet you that's what's driving some of this erratic behavior also.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 15574
  • Age: 63
  • Location: NorCal
Re: Not accepting offers at asking price should be illegal
« Reply #27 on: May 03, 2021, 09:24:20 AM »
I want to add that government restrictions on setting home prices is about the worst idea ever. Allowing Supply and Demand to determine housing prices is the absolute fairest way to go about it.

To anyone who complains about housing prices, I suggest some serious self examination. Do you have cable? A giant-screen TV? Anything Apple, especially a late-model I-phone? Monthly subscriptions? A fancy car? Eat out? Use Door Dash? Buy brand-new clothes? Take expensive vacations? Further, are you doing everything you can to maximize your income?

As a singleton who never made a lot of money and always lived in a HCOLA, my first two properties required creative thinking and sacrifice. It was absolutely worth the effort.

To @minority_finance_mo's cross post. Study the history of the real estate market. It is always cyclical. Buy low, sell high doesn't just apply to the stock market. FOMO is arguably the worst reason to buy a house you can't afford.

Roland of Gilead

  • Handlebar Stache
  • *****
  • Posts: 2296
Re: Not accepting offers at asking price should be illegal
« Reply #28 on: May 03, 2021, 09:39:51 AM »
I want to add that government restrictions on setting home prices is about the worst idea ever. Allowing Supply and Demand to determine housing prices is the absolute fairest way to go about it.

Not really.   The problem with saying it should just be supply and demand is that the government heavily regulates the housing market with zoning, permits, tax laws, etc.   

It is like the drug market.  People are clamoring to have the government step in and regulated drug prices because supply and demand just doesn't work.

maizefolk

  • Walrus Stache
  • *******
  • Posts: 5676
Re: Not accepting offers at asking price should be illegal
« Reply #29 on: May 03, 2021, 09:53:48 AM »
As someone saving as a first-time homebuyer at this point in my late 20s, it's really disheartening to see the price of homes increase so significantly in the last year. Makes you feel like if you didn't get on the boat in time, you're left off the ride. I bet you that's what's driving some of this erratic behavior also.

I can completely understand feeling that way. And I suspect you are right that a lot of people are all feeling that way is part of what is driving the spike in home prices, which in turn is making even more people feel disheartened and/or that buying a house right now has become an urgent priority. Despite the very real root causes*, it becomes something of a self-reinforcing cycle.

*Low interest rates, highly paid people with newly remote jobs moving out of VHCOL cities to HCOL or MCOL cities, people being willing to spend more on homes when they've been mostly shut up inside their house/apartment for a year, frustration with constantly losing bidding wars (like the OP) leading people to conclude "screw it, I'm putting in an offer for 30% over asking, let's just get this done.

secondcor521

  • Magnum Stache
  • ******
  • Posts: 3767
  • Age: 52
  • Location: Boise, Idaho
  • Big cattle, no hat.
    • Age of Eon - Overwatch player videos
Re: Not accepting offers at asking price should be illegal
« Reply #30 on: May 03, 2021, 09:59:11 AM »
As someone saving as a first-time homebuyer at this point in my late 20s, it's really disheartening to see the price of homes increase so significantly in the last year. Makes you feel like if you didn't get on the boat in time, you're left off the ride. I bet you that's what's driving some of this erratic behavior also.

I can completely understand feeling that way. And I suspect you are right that a lot of people are all feeling that way is part of what is driving the spike in home prices, which in turn is making even more people feel disheartened and/or that buying a house right now has become an urgent priority. Despite the very real root causes*, it becomes something of a self-reinforcing cycle.

*Low interest rates, highly paid people with newly remote jobs moving out of VHCOL cities to HCOL or MCOL cities, people being willing to spend more on homes when they've been mostly shut up inside their house/apartment for a year, frustration with constantly losing bidding wars (like the OP) leading people to conclude "screw it, I'm putting in an offer for 30% over asking, let's just get this done.

Another feedback loop is on the supply side.  Some people considering selling may see prices rising rapidly and think either "Well, let's list later when we can get 20% more" and/or "We can sell for a lot, but that means we're going to have to pay more for our replacement home"  Neither of these are Homo economicus thoughts, but still possible.

I dunno what breaks these cycles.  They probably just break like a fever dream.  Perhaps interest rates go up and the price drops shake up the market zeitgeist.  Or a modest recession happens and people get scared.

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 18172
  • Age: 40
  • Location: Toronto, Ontario, Canada
Re: Not accepting offers at asking price should be illegal
« Reply #31 on: May 03, 2021, 10:02:09 AM »
I want to add that government restrictions on setting home prices is about the worst idea ever. Allowing Supply and Demand to determine housing prices is the absolute fairest way to go about it.

If we're going that way, then all government home ownership incentives should be removed.

My understanding is that in the US there isn't taxation of rental incomes, there are tax deductions for mortgage/property tax, and there is not always a tax on capital gains for homes.  So the government is already pretty heavily involved in altering supply/demand.

Roland of Gilead

  • Handlebar Stache
  • *****
  • Posts: 2296
Re: Not accepting offers at asking price should be illegal
« Reply #32 on: May 03, 2021, 10:05:06 AM »
If we're going that way, then all government home ownership incentives should be removed.

My understanding is that in the US there isn't taxation of rental incomes, there are tax deductions for mortgage/property tax, and there is not always a tax on capital gains for homes.  So the government is already pretty heavily involved in altering supply/demand.

In addition to those, you also have some local tax issues that are grossly unfair, like California's real estate tax.   You can have one person in a house paying $5,000 a year in tax and a person in the exact same style/size house next door paying $15,000 a year or more.

minority_finance_mo

  • Pencil Stache
  • ****
  • Posts: 750
    • Minority Finance
Re: Not accepting offers at asking price should be illegal
« Reply #33 on: May 03, 2021, 11:46:38 AM »
In addition to those, you also have some local tax issues that are grossly unfair, like California's real estate tax.   You can have one person in a house paying $5,000 a year in tax and a person in the exact same style/size house next door paying $15,000 a year or more.

Why would that be?

maizefolk

  • Walrus Stache
  • *******
  • Posts: 5676
Re: Not accepting offers at asking price should be illegal
« Reply #34 on: May 03, 2021, 12:03:16 PM »
In addition to those, you also have some local tax issues that are grossly unfair, like California's real estate tax.   You can have one person in a house paying $5,000 a year in tax and a person in the exact same style/size house next door paying $15,000 a year or more.

Why would that be?

California passed prop 13 back in the 1970s which restricts the growth of property taxes while the same person owns a property to well below the rate of inflation (less alone the rate of growth in property values).

While this was passed with good intentions -- don't want people kicked out of their homes because they cannot afford the growing tax bill -- it has functioned to shift the cost of running the state from older and, in aggregate, much wealthier households who have lived in the same house for decades onto younger and, in aggregate, poorer households who bought their houses much more recently.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 15574
  • Age: 63
  • Location: NorCal
Re: Not accepting offers at asking price should be illegal
« Reply #35 on: May 03, 2021, 12:07:53 PM »
I want to add that government restrictions on setting home prices is about the worst idea ever. Allowing Supply and Demand to determine housing prices is the absolute fairest way to go about it.

If we're going that way, then all government home ownership incentives should be removed.

My understanding is that in the US there isn't taxation of rental incomes, there are tax deductions for mortgage/property tax, and there is not always a tax on capital gains for homes.  So the government is already pretty heavily involved in altering supply/demand.
I'm not a tax professional, but I am damn sure I pay taxes on my rental income. I am also positive i paid a shitload of capital gains taxes on the portion of the gains that were over the (relatively modest for a HCOLA) limit. Paging @seattlecyclone.

FINate

  • Handlebar Stache
  • *****
  • Posts: 2138
Re: Not accepting offers at asking price should be illegal
« Reply #36 on: May 03, 2021, 12:27:08 PM »
Is it?

Because our market is absolutely insane up here where I am in Canada and no one is suppressing development. It's actively being encouraged in my area.

Markets are not isolated islands, especially in a remote work world. I can't speak to what's going on in Canada, but in the USA no-growth West Coast regions are essentially exporting their manufactured housing shortage. Even pro-growth areas are having difficulty keeping up with the surge in demand, made worse by COVID shortages. It's a mess, though hopefully areas actually building housing will catch up in a year or so.


seattlecyclone

  • Walrus Stache
  • *******
  • Posts: 5942
  • Age: 36
  • Location: Seattle, WA
    • My blog
Re: Not accepting offers at asking price should be illegal
« Reply #37 on: May 03, 2021, 12:33:31 PM »
I want to add that government restrictions on setting home prices is about the worst idea ever. Allowing Supply and Demand to determine housing prices is the absolute fairest way to go about it.

If we're going that way, then all government home ownership incentives should be removed.

My understanding is that in the US there isn't taxation of rental incomes, there are tax deductions for mortgage/property tax, and there is not always a tax on capital gains for homes.  So the government is already pretty heavily involved in altering supply/demand.
I'm not a tax professional, but I am damn sure I pay taxes on my rental income. I am also positive i paid a shitload of capital gains taxes on the portion of the gains that were over the (relatively modest for a HCOLA) limit. Paging @seattlecyclone.

True, taxes are definitely owed on rental income. You do get to deduct expenses such as repairs, mortgage interest, and depreciation against that rental income, and you only pay tax on the net. The depreciation bit especially makes it so that many landlords show a loss on paper even when the unit is cash-flow positive. There's a provision called a "1031 exchange" that lets you sell a rental property, buy another one, and defer any capital gains taxes until you sell the second property. Then if you hold that rental home until you pass away the cost basis steps up to market (wiping out any unrealized gains) and your heirs get to start the depreciation all over again based on the structure's value at that time. Do it right and rental properties can be a really nice tax shelter.

Note that I have zero first-hand expertise with landlording so my knowledge in this area is at more of a surface level than the aspects of the tax code I have experienced myself.

Michael in ABQ

  • Handlebar Stache
  • *****
  • Posts: 1407
    • Military Saints
Re: Not accepting offers at asking price should be illegal
« Reply #38 on: May 03, 2021, 08:34:58 PM »
It is for a different topic but they really need to raise interest rates to get a handle on this situation.   Way too much easy loan money out there which is why people can buy $800,000 homes on a $100,000 income.

If this is the obvious solution, then why do you think it hasn't been done?


The US government has just added $5-6 trillion in debt in the last 15 months or so. Right now that's all borrowed money with nominal interest. Raise interest rates and all of the sudden the $400 billion in interest on our $28 trillion in national debt becomes $600 billion or $800 billion. And to think, a decade ago our national debt was half what it is today (roughly $14 trillion in 2011.

Malcat

  • Walrus Stache
  • *******
  • Posts: 6324
Re: Not accepting offers at asking price should be illegal
« Reply #39 on: May 03, 2021, 08:42:05 PM »
It is for a different topic but they really need to raise interest rates to get a handle on this situation.   Way too much easy loan money out there which is why people can buy $800,000 homes on a $100,000 income.

If this is the obvious solution, then why do you think it hasn't been done?


The US government has just added $5-6 trillion in debt in the last 15 months or so. Right now that's all borrowed money with nominal interest. Raise interest rates and all of the sudden the $400 billion in interest on our $28 trillion in national debt becomes $600 billion or $800 billion. And to think, a decade ago our national debt was half what it is today (roughly $14 trillion in 2011.

So then not actually a good solution I gather.

The_Dude

  • Stubble
  • **
  • Posts: 203
Re: Not accepting offers at asking price should be illegal
« Reply #40 on: May 04, 2021, 12:07:58 AM »
Weíve been house hunting in California and have family friends that are realtors and brokers. Most of them have been doing this since the 90ís and theyíve never seen the level of bidding wars going on. As others have said, inventory is crazy low.

One of the houses we bid on sold for $50k over asking and had 27 offers. They only accepted offers for 48 hours (becoming the norm). Another house we bid on sold for $100k over asking and received 50 offers in 48 hours. It is insane!!

Dicey

  • Senior Mustachian
  • ********
  • Posts: 15574
  • Age: 63
  • Location: NorCal
Re: Not accepting offers at asking price should be illegal
« Reply #41 on: May 04, 2021, 01:05:23 AM »
I want to add that government restrictions on setting home prices is about the worst idea ever. Allowing Supply and Demand to determine housing prices is the absolute fairest way to go about it.

If we're going that way, then all government home ownership incentives should be removed.

My understanding is that in the US there isn't taxation of rental incomes, there are tax deductions for mortgage/property tax, and there is not always a tax on capital gains for homes.  So the government is already pretty heavily involved in altering supply/demand.
I'm not a tax professional, but I am damn sure I pay taxes on my rental income. I am also positive i paid a shitload of capital gains taxes on the portion of the gains that were over the (relatively modest for a HCOLA) limit. Paging @seattlecyclone.

True, taxes are definitely owed on rental income. You do get to deduct expenses such as repairs, mortgage interest, and depreciation against that rental income, and you only pay tax on the net. The depreciation bit especially makes it so that many landlords show a loss on paper even when the unit is cash-flow positive. There's a provision called a "1031 exchange" that lets you sell a rental property, buy another one, and defer any capital gains taxes until you sell the second property. Then if you hold that rental home until you pass away the cost basis steps up to market (wiping out any unrealized gains) and your heirs get to start the depreciation all over again based on the structure's value at that time. Do it right and rental properties can be a really nice tax shelter.

Note that I have zero first-hand expertise with landlording so my knowledge in this area is at more of a surface level than the aspects of the tax code I have experienced myself.
Thanks @seattlecyclone!

Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 7454
  • Location: Norway
Re: Not accepting offers at asking price should be illegal
« Reply #42 on: May 04, 2021, 03:24:43 AM »
Laws for fining brokers who make the listing price too low exist, in Norway. Here, a listing price should be so realistic that a seller wants to sell for it. When we sold our house, the broker clearly communicated that to us. Sometimes we read in the paper that some house is listed too low, but that often reaches the news.
Brokers are also by law mandated to provide a list of offers to the buyer, so that the buyer can investigate how realistic the other offers were. Normal procedure is that each offer is communicated immediately to all potential buyers who signed up for that. Even this can go wrong. We were once in a bidding round where the broker didn't inform us of the last bid. A pity for the seller, as we might had been willing to offer more.

In Norway we have another issue outside the big cities. Building a house costs more than you will ever get back when you sell it, as houses in the district are cheap. Therefore banks are not willing to provide mortgages to young people who want to take the chance building a new house there. Therefore everyone is depending on those few already existing houses. Some communities are now asking cabin owners to sell their cabin, so people can live in it.

Fishindude

  • Magnum Stache
  • ******
  • Posts: 2788
Re: Not accepting offers at asking price should be illegal
« Reply #43 on: May 04, 2021, 05:58:59 AM »
I agree it is a very BS unethical way to price / sell something.
Imagine if you walked into the store, saw milk for $3.00 per gallon, grabbed a jug then had to bid higher for it to get it, when you went up to the check out.
If you are going to advertise at a particular price, you should be obligated to sell at that price.

norajean

  • Pencil Stache
  • ****
  • Posts: 566
Re: Not accepting offers at asking price should be illegal
« Reply #44 on: May 04, 2021, 06:47:04 AM »
Weíve been house hunting in California and have family friends that are realtors and brokers. Most of them have been doing this since the 90ís and theyíve never seen the level of bidding wars going on. As others have said, inventory is crazy low.

One of the houses we bid on sold for $50k over asking and had 27 offers. They only accepted offers for 48 hours (becoming the norm). Another house we bid on sold for $100k over asking and received 50 offers in 48 hours. It is insane!!

Many parts of California have been hot markets for decades. We were house shopping the Bay Area 14 years ago and routinely being blown out of the water by all cash bids $200,000 over asking.  We sold our house there last month and the process was the same as 2007 - list two weeks with two open houses before accepting bids, then ask competitors to top high bid.  Our buyer had a loan but waived appraisal, which made no sense to me but it all worked out.

omachi

  • Pencil Stache
  • ****
  • Posts: 876
  • Location: Minnesota
Re: Not accepting offers at asking price should be illegal
« Reply #45 on: May 04, 2021, 07:12:11 AM »
I agree it is a very BS unethical way to price / sell something.
Imagine if you walked into the store, saw milk for $3.00 per gallon, grabbed a jug then had to bid higher for it to get it, when you went up to the check out.
If you are going to advertise at a particular price, you should be obligated to sell at that price.
Imagine thinking houses were a homogenous commodity like a gallon of milk.

If you don't want to pay more than the listed price, don't. Nobody can make you. If nobody ever offered more than list price, this wouldn't even be a discussion. In this market, though, people will. They understand that the price they are willing to pay is related to the value they place on the property, which may be higher than the listed price. Some of them will also not get the house, but I somehow doubt they're stating that it should be illegal to not accept an offer above the listed price.

Also, does anybody actually think that the asking/listed price is some final price and the first one to offer it wins? Isn't it understood that the seller is saying hey, this is a big, hard to price asset and I'd be willing to sell it for this, perhaps less if I don't get any other offers, but if somebody offers me more I'm under no obligation to take the smaller number?

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 18172
  • Age: 40
  • Location: Toronto, Ontario, Canada
Re: Not accepting offers at asking price should be illegal
« Reply #46 on: May 04, 2021, 07:22:16 AM »
I agree it is a very BS unethical way to price / sell something.
Imagine if you walked into the store, saw milk for $3.00 per gallon, grabbed a jug then had to bid higher for it to get it, when you went up to the check out.
If you are going to advertise at a particular price, you should be obligated to sell at that price.
Imagine thinking houses were a homogenous commodity like a gallon of milk.

If you don't want to pay more than the listed price, don't. Nobody can make you. If nobody ever offered more than list price, this wouldn't even be a discussion. In this market, though, people will. They understand that the price they are willing to pay is related to the value they place on the property, which may be higher than the listed price. Some of them will also not get the house, but I somehow doubt they're stating that it should be illegal to not accept an offer above the listed price.

Also, does anybody actually think that the asking/listed price is some final price and the first one to offer it wins? Isn't it understood that the seller is saying hey, this is a big, hard to price asset and I'd be willing to sell it for this, perhaps less if I don't get any other offers, but if somebody offers me more I'm under no obligation to take the smaller number?

Homogenous commodity vs unique one I don't think matters.  If you go back through human history you would see that the idea of a fixed/constant price at all is a very modern one.  Haggling and bargaining has usually been a much more normal state for people selling/trading any goods.

ender

  • Walrus Stache
  • *******
  • Posts: 6357
Re: Not accepting offers at asking price should be illegal
« Reply #47 on: May 04, 2021, 07:25:32 AM »
I agree it is a very BS unethical way to price / sell something.
Imagine if you walked into the store, saw milk for $3.00 per gallon, grabbed a jug then had to bid higher for it to get it, when you went up to the check out.
If you are going to advertise at a particular price, you should be obligated to sell at that price.

Is it a BS unethical approach to make real estate offers for under asking price, too?

maizefolk

  • Walrus Stache
  • *******
  • Posts: 5676
Re: Not accepting offers at asking price should be illegal
« Reply #48 on: May 04, 2021, 07:31:38 AM »
For homogenous goods it is possible to conduct price discovery by selling goods and changing the price (lowering it if you sell too few of the good, raising it if you're constantly out of stock) until supply and demand are aligned.

For unique goods, there isn't any effective way to discover what the market clearing price is until it is actually sold.

GreenEggs

  • Handlebar Stache
  • *****
  • Posts: 1311
  • Location: Here & There
Re: Not accepting offers at asking price should be illegal
« Reply #49 on: May 04, 2021, 07:34:30 AM »
Everyone hears about the low-interest rates and the high cost of lumber being part of the housing supply problem.  But nobody mentions what shutting down the Southern border has done to create the labor shortage.  Building housing requires a lot of hard-working low skilled labor. 


ICE shut down immigration under Trump and it seems Biden has continued to keep immigrants out. 




Getting back to the crazy RE market conditions, I don't understand why the demand doesn't wane.  Why do so many people want to subject themselves to such a cruel market?  Where are the sellers planning to go?  Don't they realize that by selling they will become buyers?  The gains from their sale will just evaporate when they go shopping for a replacement.  So, my question is "Who's actually winning?" in this market?