Dated: June 15 2021

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In Today’s Market, Listing Prices Are Like an Auction’s Reserve Price

In Today’s Market, Listing Prices Are Like an Auction’s Reserve Price | MyKCM

For generations, the process of buying and selling a home never really changed. A homeowner would try to estimate the market value of their house, then tack on a little extra to give themselves some negotiating room. That figure would become the listing price. Buyers would then try to determine how much less than the full price they could offer and still get the home. As a result, the listing price was generally the ceiling of the negotiation. The actual sales price would almost always be somewhat lower than what was listed. It was unthinkable to pay more than what the seller was asking.

Today is different.

The record-low supply of homes for sale coupled with very strong buyer demand is leading to a rise in bidding wars on many homes. Because of this, homes today often sell for more than the list price. In some cases, they sell for a lot more.

According to Lawrence YunChief Economist at the National Association of Realtors (NAR):

“For every listing there are 5.1 offers. Half of the homes are being sold above list price.”

You may need to change the way you look at the asking price of a home.

In this market, you likely can’t shop for a home with the former approach of negotiating to a lower price.

Due to the low supply of houses for sale, many homes are now being offered in an auction-like atmosphere in which the highest bidder wins the home. In an actual auction, the seller of an item agrees to take the highest bid, and many sellers set a reserve price on the item they’re selling. A reserve price is the minimum amount a seller will accept as the winning bid.

When navigating a competitive housing market, think of the list price of the house as the reserve price at an auction. It’s the minimum the seller will accept in an absolute auction, though in non-absolute auctions the reserve price doesn't mean that the seller will agree to accept the reserve price unless the terms are also deemed to be acceptable as well.

I've personally been involved in a luxury home auction where a home sold for over $3 million dollars (one of the highest sales prices in nearly 3 years at the time in a well-known vacation resort) and I have "experienced" the competitive market dynamic which can be created when a home is sold during the urgency of an "event," after a set period of "preview" days or weeks.

My listing strategy process today has been crafted from what I took from this auction experience, and primarily from many of the things I learned as a Sales Manager for America's largest homebuilders in the Charlotte area. After strategically working through my sales teams, over the years when I managed 4000+ new home sales in our area, I learned how to effectively create "auction-like" urgency prior to releasing new neighborhood homesite sections. 

Today, the asking price is often becoming the floor of the negotiation rather than the ceiling. But there are KEY differences in how I've learned to communicate with prospective buyers and importantly, buyer agents, during a listing preview process I use - all prior to a time and date when my clients entertain offers. I would love to talk with you when you're ready to sell your current property! 

As far as for my buyer clients... when we find a home that you really love, know that it may ultimately sell for more than the sellers are asking. So, as you’re navigating the homebuying process, make sure you know your budget, know what you can afford, the plan design popularity & REAL market value -  and that you work with a trusted advisor who can help you make all the right moves as you buy a home - including how to leverage an all cash offer, special terms, and even how to buy even prior to listing your current home for sale, among other strategies

Bottom Line

Someone who’s more familiar with the housing market of the past than that of today may think it’s foolish to offer more for a home than the listing price. However, frequent and competitive bidding wars are creating an auction-like atmosphere in many real estate transactions right now. Let’s connect today so you have a trusted real estate professional on your side to provide the best advice on how to make a competitive offer on a home. 

CALENDAR LINK : schedule a call or zoom meeting

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Wray Farlow

NC/SC Real Estate Broker 29+ years specializing in Charlotte-area new home sales & marketing - VP Sales, Shea Homes & Ryland Homes, 1990’s – 2007, period when 46% of Charlotte-area homes built. -....

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