Over-List Pricing Leaves Some Potential Home Buyers Feeling Less Than Euphoric
By Kay Whatley, Editor
Spurred by the change in marijuana laws, it seems, the Denver housing market is giving home buyers a run for their money. Potential buyers are offering well over list price for houses, and still not getting the properties.
I’m no real estate expert. My husband and I bought and sold homes. In our experiences, buying a home meant putting in an offer below list price, then negotiating from there. In Denver right now, however, offering below or even at list price is not the norm. Homes are hitting the market and selling quickly, sometimes for tens of thousands of dollars above the list price. Fewer homes are on the market than usual, with homes sold quickly — often with hundreds of potential buyers walking through almost as soon as the home is listed for sale!
The general feel among buyers is that Denver’s marijuana-friendly environment is a draw. The city has been an attractive place to live for a long time; however, the influx of new residents seems to be heavily laden with people who want to live where pot is legal, where medical marijuana is more accessible, and where growers can practice their craft without fear of jail. Investors are there, too, following the money-crazy seller’s market to pick up fixer uppers, update them, and resell at a much higher price soon after.
Let’s say, as an example, a house is listed at $230,000. That is considered what the house is worth. Several buyers come in and make offers. One family offers $5,000 over the list price. Another family offers $12,000 over the list price. If the second family’s offer is accepted, they then buy the $230,000 home for a sale price of $242,000 — oftentimes having to pay the extra cash at closing since many banks won’t allow a mortgage amount that is above-value when the house is purchased.
My husband Frank spent much of his life in Denver, and his family is based there. Rental prices have gone up by hundreds of dollars a month over the past year or so. Buying a home has become a competitive exercise, with some families putting in offers on eight or more homes without submitting a “winning bid.” Bids are almost expected to be thousands — or tens of thousands — above the list price, which as a novice I’m guessing could mean that as soon as a house is purchased, the buyers are under water. A home buyer’s only hope is that the market will continue to be crazy-good for sellers, and they could potentially resell their “over priced” house and regain the money paid.
We have family that is looking for a new Denver home, close to where they used to live. So far, they have made offers on close to a dozen homes. They have offered above list, written letters to the homeowners — at the suggestion of their realtor, and moved quickly as new homes hit the market. Still, they have seen homes go to winning bidders who offer as much as $70,000 or $80,000 more than list price. In one case, it meant a $225,000 home went for over $300,000.
For Denver-ites, it means neighborhoods that used to be affordable are less likely to be in their price range.
Denver is a great city; it’s just selling in a way that is not the norm. Likely there will always be an influx of people wanting to live in the mile high city. Nowadays, though, the Denver lovers and high seekers are competing for fewer and more expensive housing.
As long as this super seller’s market goes on, homes will sell for more than they’re worth. What will change it? Would legalization in other states slow down the market? I’m guessing even the experts can’t predict what will happen over the next ten years. In the short term, other parts of the country might consider following the money.