Sellers Deliberately Underprice Homes to Spur Bidding Wars in San Francisco BA

nytimes.com

4 points·hyperrail··6 comments

This is interesting for the complex game theoretic interactions between the realtor, seller, and buyer. Buyer and seller are focused on the price of course, but also have varying amounts of time pressure

But the most interesting case is the realtor. The realtor obviously gets a fee, which is probably a percentage of the closing price.

But the realtor is particularly conflicted, because they can use an attractively low starting price to attract more customers for their business.

For example unsuccessful buyers might still go on to buy a different property from the realtor.

The realtor can also use the price negotiation to alter the buyer and seller's expectations about what is a reasonable price

Not sure why they are focused on the Bay Area. This happens across the US and even other countries as well.

I think this wasn't as big a thing a decade ago, and most people don't understand the implications of what it means. In the GTA (greater Toronto area), it is being done universally .. nearly every home goes over asking. From the buyers perspective, it means you need to have a great agent who is able to give you a fair assessment for the current market price of the home. This is really not easy when in a crazy market where prices rise all the time.

This has a simple fix btw. Just cap the listing realtors commission based on their listing price. The problem gets solved overnight.

A cap like that would just incentivize listing higher and offering a steep discount.

So what? The asking price is just a starting point for negotiations. It's almost completely meaningless.

Isn't this done for anything that sells via auction or some kind of bidding system?

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