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Why is this property so cheap?

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I get this question a lot with my newer buyers. In this market, with prices increasing seemingly hourly, they will email me a property that looks to be priced well below what the appropriate list price would be. And they want to know why it’s listed so low. There can be many reasons for this:

  1. There could be something significantly wrong with the property that isn’t visible from the pictures - it could overlook a cemetery (“Hello Santa Clara!”), be located so close to the freeway you can check traffic from your kitchen, have had a particularly brutal death in the property or it could have a really, really bad floor plan, etc.
  2. The listing agent may not be familiar with the market and doesn’t know where the property should have been priced at.
  3. The listing agent likes to send out those postcards saying how much higher their listings sold for...”Listed at $500,000, but sold for $800,000”.
  4. The listing agent feels listing the price significantly lower than market value will create a ‘buying frenzy’. IMO, this is just plain mean to buyers and damaging to sellers.

If a property is priced too low, it will primarily bring in buyers that can’t afford what the property will actually sell for and it will also bring in fewer buyers that could afford the property, which could have potentially driven the price or terms to something more favorable to the seller. For example, people that can afford $1.5m home aren’t typically looking at homes priced at $1.1m. Luckily for you, I am also keeping track of what you are looking for and I will point out if a property may suit you that’s mis-priced.

What an amazingly low-priced property (probably*) isn't: An opportunity to get the house at a price well below market. In this multiple offer market, the offers will bring the price up to where it should have been. If it’s priced way too low, some of the offers will be way off base (too low), but there will be enough offers that will reflect the current market to bring it up to where it would have been if it had been listed at a more realistic price point.

There are (almost) no absolutes in Real Estate, so these blog entries are my opinion, and not to be considered the only option or a criticism of methods used by other agents.