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Sometimes they're called "setups," and the idea is to list a house or condo for a crazy-high asking price as a way of getting brokers and potential buyers over to similar homes nearby at far lower prices. The seller is frequently unaware of what his or her broker is doing. Eventually the "pinball" property is reduced sharply, but by then brokers have stopped showing the home and the seller has lost prospective buyers. "We're definitely seeing it," Sandy Nichols Acevedo, an agent at Prudential California Realty in Oxnard, tells real estate columnist Ken Harney. "Some people think they can go higher now because the market seems to be doing better."
Bill Gillhespy, an agent in Fort Myers Beach, Fla., has a real life example: He currently 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 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."
Seems like we should distinguish between unrealistic home sellers who insist on overpricing their property from unscrupulous brokers who encourage the higher number. By the way, NPR had a good piece this morning about the growing shortage of foreclosed properties in the Inland Empire.
In front of a county courthouse in Corona, about 80 bidders with lawn chairs sit in the shade as trustee sales for foreclosed properties are under way. Nearly all of them have their cellphones and envelopes full of cashier's checks to pay for their winning offers. No one here is bidding on a home to live in it. They're people like Gabriel Anguiano, who's recast himself from golf course manager to minor real estate tycoon. In the past four years, he's bought and rehabbed 120 houses to rent or flip. "I would buy a $30,000 condo, put in another $5,000 in remodels and then sell it for 80, 90. So you make $50,000," he says. Demand for rentals is also high because those who lost their homes need a place to stay. Anguiano can rent a property and still make a tidy profit. The only problem is that others are catching on.
Mark Lacter created the LA Biz Observed blog in 2006. He posted
until the day before his death on Nov. 13, 2013.