I have a question for realtors. This is not meant to be confrontational or obnoxious, I would just be interested in what other possible reasons could exist for the scenario I describe below that I must be overlooking.
I am asked to appraise a house for a purchase transaction. The house is listed for $139,000. The house is very typical for the area, a low-end spec home in a neighborhood full of the exact same type of house, many with the same floorplan, same condition, etc. This particular neighborhood has a 40% foreclosure rate, and pretty much has since it was built about 10 years ago. It is predominantly first time, low-income buyers. Right now there are at least a dozen homes that are similar in size, bed and bath counts, quality, condition, and in the exact same area, on similar lots. Almost no discernable differences.
So here is my question. How on earth does a buyers agent allow their client to sign a contract offering to buy this house at FULL PRICE????
There are no seller concessions or repairs rolled in. There are a dozen other very similar homes they could have for less money (foreclosures, which I understand take more work, for under $100k, and "market" listings for $113k to $132k). There is no possible way an agent could do a CMA and justify this price. The last home that sold for over $135k was over two years ago, and it had superior updates.
When I see these deals I just shake my head, and can only figure that their agent is just not working in their best interests. I see this fairly regularly -- full price contracts for houses in very homgenous neighborhoods where it is VERY apparent that the price is well above what other similar homes are selling for. Yet the contracts are full price offers. Are there really that many buyers out there that just insist on buying that house for a premium regardless of how hard the agent works to dissuade them? Is that what is happening behind the scenes? A hardworking agent pleading with their buyers not to offer full price, since there is no way the house will appraise for that amount and even if they find some crappy appraiser to "make it work" they will likely end up losing money on it; but yet the buyer insists that they write up the contract at full price and submit it? They just love the living room paint color?
The only other answer I can come up with is that the owner refused to budge on their list price (leading to a conversation about the listing agent), and so they are going to see where the appraisal comes in and renegotiate?
How else does this situation occur? When I see these contracts come across my desk, I just want to call the buyers agent and ask them how they came to the conclusion that this was a reasonable offer, but I can't. So educate me, let me know what I am overlooking here...
Thank you, we'll be in touch!