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Don’t Fall For This Trick When Buying A Home

Updated: Mar 11, 2021

If you are a first time home buyer in the Bay Area, be sure to caution yourself of this trick being used on the listing prices of homes for sale. Many prospective buyers are not aware of what is being done, and often face a major disappointment when they finally find out. Hopefully this article will enlighten you so that you can be better prepared during your home search.

So what is the trick? It’s essentially “click-bait”. There are many homes that get listed for sale at prices that are well below its true market value. Why is this done? To get your attention! And it usually works every time. For example, lets say you have been pre-qualified for a mortgage of a purchase price at $975,000. Knowing this, you set your home search parameters to a maximum price of $975,000 since you know you cannot afford anything over that amount. The search results show the perfect 4 BR / 2.5 BA / 1,995 SQFT fully updated single family home in Alameda listed at $949,000. That’s it, this is your dream house, in your desired neighborhood and within your budget! Seems too good to be true, right? Unfortunately it very well may be.

Although the list price may be $949k, the sellers (and their agent) know that any offer at or below that price will not be accepted. The true market value may be somewhere above $1M, so the goal is to drive interest to the home at this catch price in order to create a “bidding war”. It is a tried and true method that works more often than it doesn’t.

So here you are falling in love with this home after visiting it, believing that you can afford it. You put in an offer at $975,000, no inspection contingencies, a 7 day appraisal contingency, a 17 day loan contingency and a 30 day close. Should be a solid offer, right? I mean, it’s $26k over the asking price. WRONG. The next day you find out that your offer was not accepted, and that there were 11 other offers, with yours being in the bottom half of those submitted. How could this be? Well, you were tricked.

How were you supposed to know that the house was listed at a fake price? You probably wouldn’t. It’s not always easy to find that out. It should be your Realtor’s job to point this out to you ahead of time so that you can avoid the later disappointment. A good Realtor will conduct a true market value analysis of a property of interest to ensure that you are within the range to purchase it. This should also be done to avoid over paying for a home.

You may be asking, “Why is this happening? Why don’t they just list it for $1M?” Well, by doing that, it eliminates a lot of potentially interested buyers. Listing agents want to get as many people attracted to a home as possible, and pricing a home below market value does just that. Having a competition between 11 buyers is far better than just 2.

It is worth noting that this does not occur in all real estate markets. The Bay Area’s real estate market is so unique that many of the trends that occur here do not apply anywhere else in the country. We have been experiencing a “Seller’s Market” for years now, and they continue to have the upper hand when a property goes up for sale. So in a sense, a seller can almost do as they wish and there is still likely to be a number of buyers lined up to purchase their home no matter the condition or list price. There are not enough homes available for sale, which creates an unmet demand for a large number of well-qualified buyers.

Berkeley, CA

According to the local Realtor Associations’ statistics, buyers in the Bay Area end up paying 3% over the list price of a single family home on average in 2020. Many cities are well above this amount, and some are slightly below. Buyers in Berkeley were paying nearly 112% of the average list price. Compare that to Stanford (94%) and Woodside (96%), where buyers are “getting deals” and paying less than a home’s initial list price. However it is worth noting that the average sale price of a home in those cities is well above $2.5M.

*Sources: BayEast Association of Realtors, San Mateo County Association of Realtors, Santa Clara Association of Realtors, San Francisco Association of Realtors. For the full list, please inquire.

The chart to the right shows the percentages of the list price versus the final sales price in some Bay Area cities. These numbers do not necessarily mean that buyers will always pay a premium for a home they are looking to purchase. There are many homes that sell for at or below the list price as well. The best way to ensure you are submitting the right offer price on a home is to consult with your Realtor and request that they do a proper valuation analysis ahead of time.

Now that you are informed, I hope that you can be more aware of this potential issue when shopping for your home. Also, do not be discouraged if this happens to you. This is a highly competitive market, and getting outbid happens to many buyers. You will get the right home when it is meant to be =)

If you have experienced this during your home search, please share your thoughts! I’d love to hear your feedback.

Laurence Lee is a REALTOR® serving the Bay Area. If you are interested in buying a home, feel free to contact or visit for more information on our exclusive Familee Discount Program that we offer to our clients.

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