Buzz of the week: low inventory and price-to-entice marketing strategies

My colleagues and I have been discussing two main issues this week. The first is the shortage of homes for sale, in every area, in the $700k and under price range. The only stuff out there is either geographically undesireable, a fixer or ridiculously overpriced. Sounds like my dating life when I was single.

The other issue is the deliberate underpricing by some Realtors in order to create bidding wars. Here's how it works: a Realtor lists a home $50k or more below the comparable sold properties, does no marketing, and quickly gathers multiple offers which bid each other up for the "great" deal. The properties always go over the (under) listed price. Who benefits? Primarily, the Realtors, who spend no money marketing the property. Who loses? The seller, who gets a fast sale but no real marketing. Who knows what kind of great deal the sellers would get if a house is truly exposed to the market? And future sellers lose, too, because now there is an artificially manipulated future market, based on these new listing comparables. But the biggest losers are most buyers, who couldn't afford a market-priced house to begin with and have no hope of getting the seemingly-great deal. Buyers tend to lose heart after trying to buy and not succeeding. So if you're a buyer, if the deal seems too good to be true, it probably is.

A colleague tells me he thinks there may be a Burbank Leader story about this strategy soon, which has been frequently employed by a local team lately. Update 5/8/09: This strategy is now being applied to some not-yet-approved short sales, with the following language in the MLS: "We will accept best offer after (usually 13 days), open escrow. You inspect then we submit for bank approval." Whoa! This will get a lot of people exited about and spending their energy on about a property that may not even be able to "go" short sale! Once again, if the deal seems too good to be true, it is.