I know we Realtors always say that the market sets the sales price and buyers determine the actual value of the property. But at some point, does it even make sense if some buyers are willing to sign over their first born and a pint of blood just to get a house? A friend of mine, who is a former Realtor, is looking for a house in the very competitive Nashville market. She has has grown accustomed to the multiple offers and the prospect of having to write the seller a letter, bake them a cake, babysit their kids, and wash their car in order to get her offer accepted.
Last week she and her husband viewed a for sale by owner home in Inglewood. I'm very familiar with Inglewood as I lived in Inglewood on McChesney Avenue for years before I moved to Smyrna. The home is a modest home of approximately 1600 sq ft with one bath but it had been updated. My friend stated that there was room in the unfinished basement to eventually add a second bathroom. She was concerned about the asking price being too high. After doing a market analysis and looking specifically at homes of the same age that had sold in Inglewood over the past 3 months (not even the usual 6 months span of time), I concluded too that the asking price was indeed about $20k too high. My friend stated she would talk to her husband about it and get back with me.
Three days later I see my friend and the dejection is all over her face. My friend said she spoke with the for sale by owner the previous night and they had multiple, multiple, multiple offers on the house in just 48 hours. The "winning" offer came in $30k over the already overpriced asking price and it included an additional clause that this potential buyer would increase his offer up to an additional $20k (in $1k increments) to beat any other offers. All of this supposedly comes with no appraisal clause in the contract so the buyer will have to bring cash money to the table for the amount above and beyond what the house appraises for. As I have said before, the Nashville housing market is super hot right now but I feel this is too extreme and it doesn't make good financial sense. This buyer may very well end up paying nearly $50k or more over the actual real value of this property. This run-up in pricing is almost as bad as it was in 2007! The questions has to be asked: Should you overpay to buy a Nashville home?