Have you ever gone into a high-end retail store to look at a sale item advertized at 50% off? When you see the asking price you think to yourself, 50% off a WTF asking price is still way, way too high, right? realtors play that game too. And what’s really shocking is that they openly admit it. They actually admit to manipulating buyers with false comparables to convince buyers outrageous house prices are reasonable. What do you expect from a profession that trains its salespeople at the Gap?
Overpriced ‘setup’ houses are used to sell other nearby homes
Real estate agents are using overpriced properties as negative examples to sell similar homes with lower asking prices.
By Kenneth R. Harney — June 17, 2012
WASHINGTON — In the real estate brokerage field they’re often known as “setups” or “pinball” homes, and this spring’s improving conditions in some markets could be stimulating more of them.
A setup or pinball property is a house listed with an unrealistically high asking price that pulls in lots of visits by agents and shoppers, but no offers.
Any seller who hasn’t gotten any offers over the last three months is a pinball. Their WTF asking prices pollute the MLS, and any showings they get are mostly to show buyers how much more they get for their money on another property.
The problem is this: Real estate agents, including even the listing agent, are using the overpriced house as a negative example to sell similar homes in the area that carry lower asking prices.
“It’s like a pinball machine,” said Debbie Cook, an agent with Long & Foster Real Estate in Silver Spring, Md. The “setup” is the foil — the house that agents show clients to make other, more realistically priced listings look better.
So why do sellers put up with this?
Maybe the sellers — encouraged by reports of rising sales and low mortgage rates — insisted on the aggressive asking price and wouldn’t list for anything less.
Delusion? Every owner thinks their properties are worth more than comparable properties. Because their home appeals to them, most sellers reason it must appeal to everyone else as well. It doesn’t work that way. Plus, most sellers put on blinders when greed enters their thinking.
Or maybe the sellers’ agent, not wanting to lose the listing, didn’t fully brief them about what the house could command in today’s conditions.
Ore maybe the seller’s listing agent knowingly lied to get the listing knowing full well they were going to go back in 30 days and break the bad news to the seller that their dream home is not all they believe it to be. The listing often goes to the agent who most strokes the ego of the seller, or the agent most willing to put an embarrassing WTF asking price on a house without blushing. For many agents, promising an unrealistic selling price then going back for a realistic price reduction is their standard operating procedure. They see nothing wrong with it.
Whatever the specifics, such houses tend to see heavy foot traffic but go nowhere until the sellers drop the asking prices, usually by significant amounts. Before then, however, they may be used without the sellers’ knowledge to market other houses. Since no one seriously expects them to sell at their original asking price, agents are happy to exploit the overpricing to facilitate other sales.
Unscrupulous agents take advantage of seller’s delusions and greed and use their house as a prop to make another house look better. This makes agents look bad, and it makes sellers look bad.
“We’re definitely seeing it,” said Sandy Nichols Acevedo, an agent at Prudential California Realty in Oxnard. “Some people think they can go higher now because the market seems to be doing better.”
Greed and stupidity pretty much defines California real estate. And realtors certainly haven’t done anything to correct sellers misconceptions with their yearly bottom calling.
Joe Manausa, owner-broker at Century 21 First Realty in Tallahassee, Fla., who wrote about the phenomenon on Active Rain, a Seattle-based industry blog with more than 220,000 members, offers this hypothetical example: “If two very similar homes are near each other, with one priced at $250,000, and the other at $280,000, the higher-priced home is often shown first. Then the real estate agent says, ‘If you like this home at $280,000, you are going to love the home down the street at $250,000!‘”
And buyers are that stupid? I guess if the high-end retailers can dupe people into overpaying, then realtors can do it too.
Bill Gillhespy, an agent in Fort Myers Beach, Fla., has a real-life example: He has a listing on the 14th floor of a luxury condominium project overlooking the Gulf of Mexico. The asking price is $450,000. There’s a unit on the same floor with similar views, similar square footage and layout, but with a more updated decor, that is listed for nearly $150,000 more. When Gillhespy is asked by another agent or a prospective buyer to see his unit, he often says, “Let me first show you a unit just down the hall. It’s one of the nicest in the entire building.” The higher-priced model shows well, but shoppers immediately remark on the $150,000 difference “and they can’t see how it’s justified.”
It also does nothing to justify the price that is $150,000 lower, but stupid buyers don’t seem to understand that.
Perrin Cornell, a broker at Century 21 Exclusively in Wenatchee, Wash., says some sellers in the mid-to-upper price brackets in his area “are exuberant” that we’re finally out of the recession and are tempted to disregard agents’ more sobering recommendations on pricing.
I wonder how many agents have to stop themselves from blurting out with laughter at some of the WTF asking prices people want for their properties.
It would be a great hidden camera show to invite agents over for a listing appointment and have a fake seller insist on an asking price more than double the market value just to see how agents react.
What happens to such listings? “Unless we’re using it for a setup,” Cornell said, “we stop showing it” until the seller agrees to lower the price to a sensible number.
Unless we’re using it for a setup? This guy is trying to sound reasonable and ethical while he admits to an dreadful practice.
But as a matter of principle and ethics, should realty agents accept listings from homeowners who refuse to listen to reason? Manausa is adamant that they should not.
“If you list a property at a price you know will not sell,” he said, “you are misleading the seller. Effectively you are saying, ‘I don’t think it will sell, but I’ll put my name on anything hoping to get paid.“
Yes, that’s exactly what agents are doing, and they don’t care! They have no ethics!
Acevedo agrees that agents have a fiduciary duty to educate even the most headstrong owners about sobering market realities, but has a compromise solution: Take the listing but require the seller to sign a contractual agreement requiring an automatic price reduction to a specified level if the house doesn’t sell in the first two to three weeks.
Bait and switch is the compromise solution? In the real world, no seller is going to sign an agreement with an automatic price reduction. The seller’s reaction would be to tell the agent to do a better job. The reason the house isn’t selling is due to the agent’s lousy marketing. Most often, sellers will cling to their WTF asking prices for 90 days, and they will let the listing expire. Wiser agents will wait and go after the expired listings. After the first agent fails, the seller is often more motivated to list at a reasonable price. Any listing that does not sell within 90 days is usually a WTF listing price, and the agent who expended time, effort, and advertising resources on a WTF listing price gets the nothing they deserve.
Bottom line here for owners thinking about selling in modestly improving markets: Get as much information as you can about sale prices of comparable houses in your area. Talk to multiple realty agents before listing. Sure, you can try pushing a little on price, but if you go overboard, you risk becoming the unwitting setup, the pinball, the out-of-touch competition everybody else loves to visit.
And if your really lucky, I may profile the house as a WTF asking price award winner.
Another million dollar plus Ponzi
The house was previously owned by a Ponzi who managed to extract more than a million dollars! I want one of those for the next cycle.
- This house was purchased on 5/21/2001 for $725,000. The owners used a $400,000 first mortgage, a $25,000 second mortgage, and a $300,000 down payment. At least they started out well, probably ported their equity from a previous sale.
- On 4/1/2002 they refinanced with a $650,000 first mortgage.
- On 11/7/2002 they refinanced again with a $616,000 first mortgage.
- On 7/7/2005 they went Ponzi with a $1,120,000 first mortgage and a $150,000 HELOC.
- On 7/18/2007 they refinanced with a $1,500,000 first mortgage.
- Total mortgage equity withdrawal was $1,075,000.
Let that sink in: over one million dollars in mortgage equity withdrawal. Idiots.
They defaulted sometime in early 2009 and were allowed to squat for about a year. The bank bought the property on 7/21/2010 and sat on it for nearly two years. The market is no better now than it was then for high-priced properties. In fact, prices have fallen about 15% in San Clemente since they decided to wait for better days. It wasn’t the bank’s best decision.
The games REO listing agents play
Today’s featured property is an example of a realtor who lists properties at WTF asking prices then reduces them a great deal to find the market. I imagine the other properties in the area looked like great bargains compared to this one when it was first listed.
Property History for 23 CALLE AMENO
| Date | Event | Price | |
|---|---|---|---|
| Jun 14, 2012 | Price Changed | $1,049,000 | |
| Jun 04, 2012 | Price Changed | $1,199,000 | |
| May 11, 2012 | Price Changed | $1,388,500 | |
| Apr 19, 2012 | Listed (Active) | $1,410,000 | |
WTF? $260,000 in price reductions in two months. Do you think she overpriced that one?
San Clemente Overview
Median home price is $603,000. Based on a rental parity value of $558,000, this market is fairly valued.
Monthly payment affordability has been worsening over the last 3 month(s). Momentum suggests worsening affordability.
Resale prices on a $/SF basis increased from $278/SF to $280/SF.
Resale prices have been falling for 12 month(s). Price momentum suggests falling prices over the next three months.
Median rental rates increased $50 last month from $2,266 to $2,316.
Rents have been rising for 12 month(s). Price momentum suggests rising rents over the next three months.
Market rating = 3
Proprietary OC Housing News home purchase analysis 
23 CALLE AMENO San Clemente, CA 92672
$1,049,000 …….. Asking Price
$725,000 ………. Purchase Price
5/21/2001 ………. Purchase Date
$324,000 ………. Gross Gain (Loss)
($58,000) ………… Commissions and Costs at 8%
============================================
$266,000 ………. Net Gain (Loss)
============================================
44.7% ………. Gross Percent Change
36.7% ………. Net Percent Change
3.3% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$1,049,000 …….. Asking Price
$209,800 ………… 20% Down Conventional
4.17% …………. Mortgage Interest Rate
30 ……………… Number of Years
$839,200 …….. Mortgage
$210,137 ………. Income Requirement
$4,089 ………… Monthly Mortgage Payment
$909 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$262 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$168 ………… Homeowners Association Fees
============================================
$5,429 ………. Monthly Cash Outlays
($1,071) ………. Tax Savings
($1,173) ………. Equity Hidden in Payment
$311 ………….. Lost Income to Down Payment
$151 ………….. Maintenance and Replacement Reserves
============================================
$3,647 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$11,990 ………… Furnishing and Move In at 1% + $1,500
$11,990 ………… Closing Costs at 1% + $1,500
$8,392 ………… Interest Points
$209,800 ………… Down Payment
============================================
$242,172 ………. Total Cash Costs
$55,900 ………. Emergency Cash Reserves
============================================
$298,072 ………. Total Savings Needed
——————————————————————————————————————————————-
We're sorry, but we couldn't find MLS # S695253 in our database. This property may be a new listing or possibly taken off the market. Please check back again.
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$1,550,000 780 AVENIDA SALVADOR Ave |
0.3 miles 4 bd / 3 ba 3,300 Sq. Ft. |
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$2,350,000 786 AVENIDA SALVADOR |
0.31 miles 5 bd / 5.5 ba 4,506 Sq. Ft. |
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$1,695,000 855 AVE. ACAPULCO |
0.39 miles 4 bd / 2.75 ba 3,777 Sq. Ft. |
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$950,000 437 AVENIDA ARLENA |
0.44 miles 5 bd / 4.5 ba 4,210 Sq. Ft. |
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$1,685,000 1554 AVENIDA SALVADOR |
0.46 miles 4 bd / 2.5 ba 3,000 Sq. Ft. |
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$899,000 44 VIA ZARAGOZA |
0.56 miles 4 bd / 3.5 ba 3,000 Sq. Ft. |
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$975,000 217 South LA ESPERANZA |
0.64 miles 5 bd / 3.75 ba 3,526 Sq. Ft. |
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$819,900 121 East AVENIDA CORNELIO |
0.74 miles 4 bd / 3 ba 3,400 Sq. Ft. |
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$1,094,000 2239 AVENIDA SALVADOR |
0.77 miles 4 bd / 2.75 ba 3,360 Sq. Ft. |
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$950,000 104 AVENIDA BARCELONA |
0.87 miles 5 bd / 2.75 ba 3,000 Sq. Ft. |
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33 Responses to “realtor manipulations: using WTF priced houses to make others look reasonable”
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Not everyone is convinced the housing market has bottomed.
Radar Logic: Prices Show Monthly Gain, but Improvements Won’t Last
While other experts and analysts have concluded home prices are on the rise and the recovery is under way, Radar Logic released a report challenging the upbeat viewpoint.
“We believe that the oversupply of homes relative to demand will prevent sustained home price gains for some time,” the analytics firm stated.
The argument made by Radar Logic is that as buyers absorb the supply of homes for sale in certain markets and prices start to stabilize as a result, home owners who have been waiting on the sidelines to sell will do so once price start to improve. This will increase supply once again, and home prices will stop appreciating as supply exceeds demand.
According to the RPX Composite price index, which tracks prices in 25 metropolitan areas, home values decreased by 0.8 percent year-over-year in April 2012 and increased by 2.7 percent from the month before in March 2012.
From April 2010 to April 2011, home prices made an even steeper drop at 5.2 percent, which shows prices have improved year-over-year despite the yearly decline in April 2012.
The report also noted that spring price appreciation has been strong in the West over the years, especially in Los Angeles, Phoenix, San Jose, and San Francisco.
Quinn Eddins, director of research at Radar Logic and author of the report, warns other temporary factors are helping with the gains.
“Housing bulls point to recent strength in home price indices and say that housing has bottomed and a recovery is either underway or on the horizon. But much of the recent strength in housing prices is the result of investor demand and mild winter weather, and the effects of both are likely to be temporary.
The report explained that investor demand will eventually wane as returns for rent decreases. Also, warm weather this winter allowed for a head start into the buying season, so the early increase in demand will come at the expense of a slower buying season later unless new demand is created.
In addition to home prices, Eddins also takes a skeptical view of claims that low prices and low interest rates are making way for recovery.
Instead, he agrees with a recent article by Andrew Davidson and Alex Levin titled “Measuring Housing Affordability and Home Price equililbrium; Revisiting the Housing Bubble & Bust and HPI Modeling,” which expresses the view that when down payments and the availability of affordable mortgage products are taken into account, housing is not nearly as affordable as affordability indices suggest.
To ease or not to ease that is the question…at 11:30 PDT.
Fannie Mae: U.S. Economy Slows, Modest Growth Still Expected
The revised figures for economic growth in the year’s first quarter were disappointing, but Fannie Mae’s Economic & Strategic Research Group is still forecasting moderate growth for the remainder of 2012.
A report released by the group Tuesday projected 2.2 percent growth for all of 2012. Several factors presented risks to the economic outlook, including a slowing trend in job growth, potential contagion in the euro zone from Greece’s financial issues, the slowing Chinese economy, and the potential of a fiscal drag in the United States. Consumer attitudes also influence the economic outlook.
“Consumers remain key to the overall outlook, as attitudes appear to be reaching a plateau after a few months of improvement early in the year. Loss of momentum in labor market conditions, sluggish income growth, and decreasing saving rates suggest that consumers may need to moderate spending unless income picks up,” the group said in a release.
While the slow pace of economic activity in the spring was not necessarily unexpected, the threat that outside risks present to the economy had an effect on the group’s forecast.
“For the third year in a row, we are experiencing a spring lull in economic activity,” said Doug Duncan, chief economist at Fannie Mae. “Our view is that the underlying resilience of the economy and of consumers in particular that has been demonstrated during the past couple of years will persist. However, the magnitude of the uncertainties surrounding the European debt crisis and our fiscal condition here in the U.S. implies that the risks to the outlook are clearly titled to the downside.”
Home sales have increased 8 percent year-over-year, with sales being bolstered by increased affordability and record low interest rates. However, it should be noted that the current “high” numbers are only an increase compared to depressed levels from 2011. The group maintains “cautious optimism” for the slow recovery of the housing market despite weak employment growth, rising student loans, and a continuing stream of foreclosed households.
Home price values have stabilized in recent months as the share of distressed sales has declined. Despite this trend, the group continues to expect that home prices will show a slight decline before bottoming out in the beginning of 2013.
Oil and gold markets signaling ‘not to ease’
*latest MBA weekly purchase apps down -8.51%
Do you think gold prices will rise with more easing?
There is a correlation due to the print element. But, the type of easing and scope of the paper market can skew-it so there are no certainties
No printing this twisting….
QE 3 will happen after Operation Twist fails for a second time. I’m investing in gold and wheelbarrows.
As long as lenders have copious amounts of debt to write off, the pressure to print more money will be there. QE3 is a real possibility.
The problem with QE is it cost $2.43 for $1.00 of GDP. Not worth it. Ben has increased the national debt the same amount as the time between Ike and Clinton. Scary. No wonder gas cost $4.00/gallon and homes are 6:1 incomes. Too bad the government does not include fuel cost and other important items in the inflation number. Real inflation vs government reported inflation are not the same. The value of the dollar has been deteriorating for over 30 years. They need to:
1. Get rid of the FED
2. Stop fractional reserve lending
3. Have a currency backed by something (ie. gold, corn, wheat, silver, strippers, cocaine…whatever). Just anything that cannot be printed when governments get into trouble.
No outright QE3 unless we see oil around $40bbl.
I agree that Ben needs the market to go down before QE 3. He needs political cover before the continued devaluation of the dollar. I don’t think he will wait for oil at $40bbl though. Crude went to $40 in 2008-2009, but I don’t know if Ben will wait that long especially in an election year. In a secular bear market, the initial crash is usually the biggest. Here’s my projections for QE 3:
1. Crude: $55-60
2. Dow: 9,000-10,000
3. S&P 500: 1,000
Who knows.
The FHFA is caving in to lenders who want to pass all risk on to the US taxpayer.
FHFA Seeks to Limit Buybacks Afflicting BofA to PNC: Mortgages
The Federal Housing Finance Agency, the regulator of Fannie Mae and Freddie Mac, plans to help banks avoid being forced to buy back mortgages as it becomes concerned that lenders are tightening standards even for the most creditworthy home buyers.
The FHFA will detail flaws that would trigger a putback request, Stefanie Johnson, a spokeswoman for FHFA, said in a statement. The regulator also is standardizing the data Fannie Mae and Freddie Mac collect on each loan so they have more information when buying mortgages from lenders, she said.
Banks are requiring credit scores on government-backed loans that are between 100-200 points higher than the minimums set by Fannie Mae, Freddie Mac and the Federal Housing Administration, after the government-controlled agencies demanded lenders repurchase more than $80 billion in flawed loans over the past three years.
“The lenders perceive the pendulum has swung too far, and they’re being held accountable for things beyond their control,” said Brian Chappelle, a partner at the bank consulting firm Potomac Partners. “Their reaction is going to be to tighten up.”
PNC Financial Services Group Inc. (PNC) said June 12 it’s increasing reserves by $350 million to cover demands, while Bank of America Corp. (BAC), the second-biggest U.S. lender, said in May it will buy back $330 million of home loans from Freddie Mac “because the valuation method used at origination did not meet the investor’s technical requirements,” Dan Frahm, a spokesman for the Charlotte, North Carolina-based bank said at the time.
We are in 2012 and nothing really has changed.
“…The FHA will probably take a series of steps, such as specifying how quickly a borrower who’s gone through a short sale or foreclosure can qualify for a new FHA loan, she said…”
I’m guessing they’re not considering increasing the period required before eligibility for an FHA loan…
Can someone please explain this article in layman’s terms?
For example:
What’s a putback request?
What do they mean by ‘the investors’ technical requirements’ in the last paragraph? Are they talking about things like poor (or fraudulent) documentation? And if the loans didn’t meet the govt’s requirements, shouldn’t that be investigated for potential fraud on the parts of the banks, Fannie and Freddie, or both?
And what vintage of loans are they talking about – pre or post-2008 (or both)?
Thanks in advance!
Re: WTF pricing
I saw this strategy work in an area we are watching. The property in question was originally listed well above a recent closed sale of an identical property (the other property was right next door). We inquired about it and were advised by the seller’s agent not to make an offer below “X” or the sellers wouldn’t respond (“X” was still well above what the property next door sold for a couple of months ago). So, no offer from us.
The property then sat on the market for the next 4 months and the sellers dropped the listing $1.00 every month. No sale.
Then, unbelievably, the sellers RAISED the price $50,000. Headscratching. How do you list a property for 4 months, draw no interest at your price point and decide you are going to raise your price to an even higher WTF price? But, it seems to have worked as the property went into escrow last week after sitting at this higher price for the last month (and then the agent lowered the list back to the original list price for a reason I don’t understand).
Maybe the higher WTF price made the prior WTF price not so WTF…
Clearly, buyer beware would apply.
Reality is, prospective buyers are nothing more than a pawn on the sell-side gambling table.
The games realtors play with prices are amusing. My guess is the property went into escrow at a lower price. Also, the only reason it got any interest is the lack of inventory. Don’t be surprised to see the property fall out of escrow when it doesn’t appraise.
You didn’t see it work. You’re just surmising that’s what happened. Every day new buyers are added to the mix. Probably a ready, willing and able buyer for that house saw the listing and bought it.
Also, it’s a long shot but sometimes dramatically increasing the price puts it under the radar of a pool of higher priced buyers. Every time you move a price on the MLS you get new matches on the saved searches buyers agents have set up for their clients. You raise the price so the higher priced buyer gets the alert, then you move it back down so the system will send them a price reduction email alert.
If you’re interested in a property you need to be proactive. Sitting back watching it is a losing game. You need to contact the agent and if necessary the seller directly.
I have learned so much from this sight. I especially love the ponzi coverage.
How to make $$ in realestate –
Buy high sell low – nah
Buy, hold and rent – child’s play
Buy, extract, squat, bail – That’s how it’s done!
I too shall wait in earnest for the next bubble (I just gotta buy something before then)
“Buy, extract, squat, bail – That’s how it’s done!”
That really is the lesson most people learned from the housing bubble. Moral hazard is now the accepted norm for housing.
I think the WTF expression has officially extended to rents as well.
It was interesting to discover that the monthly rent on the property I just left 2 years ago WENT UP by over $300 per month. What a massive victory for my ex-landlord – the no-repair-making, absentee jerk that he was. Great scenario: longtime renter leaves, fix up the SFH joint, plenty of foreclosure meat to offer to, raise the rent, and presto.
Many Realtors are involved in these WTF rental transactions as well. At the current monthly rent, I would never have even looked to rent that SFH property 7 years ago.
Many have high ask rent, but what is the final real rent is hidden. Sometimes the monthly rent stays high and an extra or two months rent are kicked in, some pays for moving expense, etc.
It’s hard to price a house. I was one house that was on the market for over a year, starting very high with no offers, then lowering, lowering to a bidding war that produced near the original asking price. What I do know is that monthly payments that take 60% of the net pay is unsustainable and will make the economy ill.
QE3 is likely in the bag. See the stock market go up on all the bad news and gas prices down (some one likes BHO).
The old school formula is max. 32% for housing payments or 25% for rent.
I dunno, IR. The only way this easily works as an Evil Realtor Plot is if the listing agent is the same on both properties. That is, my friend Bob the Realtor Guy lists property A at $WTF and nearly identical property B down the bock at $TooMuch. Then he gets to pinball off A and sell B for $TooMuch.
Except…since he’s the agent on both properties, how does he (1) explain to the seller of B why he’s pricing his house way less than he’s pricing identical house A, and (2) explain to any buyer or buyer’s agent why he’s practically giving B away, but not A? Those both sound like difficult conversations to pull off without even the dimmest of buyer or seller smelling something rodentlike, no matter how gifted a bullshit artist Bob is.
You can easily pull this scheme off if you’re not the listing agent on both houses. That way, when the seller asks why you’re pricing his house at $TooMuch instead of $WTF, you can shrug your shourlders and say the agent for A is just nuts, who knows why? And when the buyer asks why B is so much better a deal than A, you can, again, shrug and blame the listing agent for A for being a clueless n00b.
That is, you could run this as a collusion, with the agent for A colluding with B, but then you’d figure the agent for A isn’t motivated to do that unless he gets a kickback from the agent for B. That’s probably illegal. More to the point, it’s complicated, and since the proceeds of one sale (even at $TooMuch) split two ways are probably less than the proceeds of two sales (even at $NotBad) — why bother?
Isn’t it possible all you’re mostly seeing is Mr. Smart Realtor taking advantage of Mr. Dumb Realtor’s WTF pricing? So Mr. Dump puts up a $WTF price. Mr. Smart wants to sell $TooMuch, so he pinballs off of Mr. Dumb’s mistake. Aggressive, to be sure, but business is business. I can’t fault a listing agent for trying to get all the market will bear for his client — and I trust that any I employ will be just as aggressive and creative in doing so. Furthermore, the only long-term effect is that Mr. Smart routinely steals Mr. Dumb’s lunch, and eventually Mr. Dumb goes out of business. That doesn’t seem like a bad thing.
It won’t work because the house won’t appraise. Simple as that. That’s why it’s not done and this article is complete nonsense.
If you bothered to read the article carefully, you should note that realtors are the ones describing the practice, not me. If you think the article is nonsense, perhaps you should contact the LA Times and set them straight.
WTF pricing?
As I am not a lawyer, will someone please explain to me how such a thing as a created sale or price is legal? Especially if intentional! What are the laws of price fixing and manipulation?
How can anyone say something is a certain percentage off a price they just made up? Isn’t that fraud? Or something else? Something more?
WTF pricing is an asking price so high, so far above market, that it actually makes buyers giggle. It’s one thing to be priced at or just above recent comps, but some listings are so overpriced that the seller should be embarrassed. That’s a WTF price, and in California, sellers have lost any sense of shame over their delusions and greed.
This article is pandering to those who want to believe there’s some sort of evil conspiracy. It’s BS. Overpriced listings don’t get traffic. Period. When a buyer says for example they can only afford a house between 300-400k, the agent will search within those parameters. If the house is over 400k it simply won’t show up in the search and won’t be shown. Realtors don’t waste their time taking people to overpriced listings. If anything, accuse Realtors of being too lazy to call the agents of overpriced listings and ask them to try to talk some sense into the seller. Of course there’s always a few fools who play an unproductive game like that but not many. It’s a total waste of time. Anchor pricing strategies may work with purses or women’s shoes but not with houses.
What this article is really saying is that the public is totally stupid for falling for something like that. These days they’re not. Most people search on their own before they choose an agent. That’s the reality. If one home out of ten is overpriced it means nothing to a buyer. The only value in showing an overpriced house is if it’s overpriced because it’s over improved. In that case it gives the buyer a chance to see what a similar house would look like after they put some money into it. It doesn’t help your readers to print what they want to hear. What helps is printing the truth.
What realtors do is show a property within the buyers price range that is overpriced to show how much more value they get with another property. If the buyer is looking in the $300K to $400K price range, a realtor will show a property worth $250K that is currently priced at $350K to show the contrast.
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I don’t know if those guys are idiots. They seemed to have extracted more then a million in about 8 years and then got a year free of rent.
If they banked that money they are in very good shape today. Probably can by an equal house for half a million cash and then spend the other half however they want.