Why are people paying so much over asking, significantly more for a house than what it was listed for? I get asked this question all the time, especially in a market like we are experiencing right now. The answer has to do with the number of houses on the market, frustration, misplaced hope, and in some situations desperation. Let’s go a little more in depth…
Perhaps the most influential reason is simply there are not enough houses on the market to choose from. When a buyer wants to buy a house and when they search they only find a handful to choose from, that can be discouraging. Then out of those a few will not suit their needs, bringing the number of options down even lower. When they find one they want they are going to compete for it, often willing to pay over asking.
Add on top of that the frustration they may feel from having put several offers in on other houses in the recent past and losing in competition. By the tenth time for example, they may be thinking “I am not going to lose on this house too!” Not only can this process be frustrating, it can be heartbreaking as well.
Speaking about heartbreaking, in some instances the buyers are following misplaced hope. They may see a house listed for a price within their budget and get their hopes up. The price may be at the top of their budget, but in their minds it is still within reach. Unfortunately some sellers and their listing agents will price the house well below market value in order to encourage more buyers to put in an offer. The seller has no intention of accepting an offer at that low price, but they know it is likely more offers will come in because of it. The more offers on a property, the higher the price will be driven often over asking.
These reasons as mentioned above all feed off emotion. Competitive people, fear of losing again, wanting that winning feeling, they all feed off each other as well and unfortunately logic and reasoning are of less importance.
Then there is another reason people pay well over asking. Desperation. Perhaps they have already sold their house and it closes very soon. If they do not find a house to buy soon, they are going to be homeless. Or a single mother with young children starts a new job and the commute is a very long drive. She needs a house closer to her new place of employment so she can get home in time to get her kids from daycare. Or a family needs to move closer to their elderly or disabled parents due to declining health reasons. The point is, they need to move. They have lost on several houses and now they are desperate. How much more would you be willing to pay?
The next time you see a house selling well over list price, instead of getting frustrated or upset think to yourself “wow somebody must have been desperate. I hope things work out for them.”
If you have any questions or concerns, or want to learn more about the crazy market we are in, Please reach out and contact Ryan Ligeza. I look forward to hearing from you.
