Occasionally you will see a real estate listing with a price that seems too good to be true - and usually it is. Despite the fact that there are bargains to be found out there the real estate market is actually pretty efficient. "Efficient" in this sense has a rather precise definition - namely that there is no shortage of smart and financially capable buyers out there that know the value of real estate - even in this market. So when a home is listed at what appears to be a bargain price either it gets snapped up quickly (bad listing agent and possibly an inside job) or it gets bid up in a multiple bid situation.
Often a listing agent will purposely underprice a listing just to precipitate multiple bids, effectively auctioning off the property via the MLS. However, although this can be an effective technique, it's not without it's risks. Suppose the highest bid is above the list price but below what the seller is willing to take? At the very least the seller and listing agent have egg on their face. Then what do they do for an encore? Raise the price? Also, if the highest bidder happens to be in a protected class both the seller and the listing agent run the risk of being accused of violating the Fair Housing Act. Believe me, you don't want to go there.
We actually ran into a rather bizarre situation recently. We showed our buyers a River North condo that had originally been listed at $369,000 and a short sale. When it didn't sell the listing agent regularly marked it down in $10K increments over a period of 4 months, finally ending up at $289,000 when we showed it. Our clients liked it and we submitted a full price offer. The listing agent promptly informed us that the bank would not accept anything less than $340,000 and would not submit the offer. She then took the listing temporarily off the market for 3 weeks and then cancelled it.
What the heck was this agent thinking? For the life of me I really can't figure it out. She couldn't have been going for a multiple bid situation because she kept taking the price down in small increments, apparently without ever generating a single acceptable bid. Could she have naively believed that one day she was going to suddenly wake up to a bidding war? Was she using the listing as buyer bait? Again, then why keep lowering the price? And she apparently had no hope of convincing the bank that their expectations were too high.
You tell me what her game was.