A popular listing strategy some agents are implementing is marketing homes substantially below market to stimulate a frenzied multiple offer situation. This means buyers compete to outbid one another with escalation clauses. The result is the seller may receive an above market final closing price and the buyer might end up paying more than the home is actually worth.
The risk with this approach is the sellers might not receive escalation high enough to bring them up to market. For example, homes in a neighborhood might be closing for sales prices at $625,000 or $278/square foot. A broker may list a home for $499,999 to stimulate multiple offers on the home, but the escalation might only reach $585,000 or $260/square foot, thus the seller loses potential income. And, homes in the neighborhood could be devalued if the strategy fails.
Another problem with this approach, is buyer's may see a home is listed for $499,999 and be very hopeful that they can purchase the home for this price and be extremely disappointed to learn they have been outbid and will never have a chance to buy this home. This creates a tough situation for buyer's agents.
Due to the competitive bidding happening in the Seattle market, buyer's and their agents are getting fatigued. Buyers may not even bid on a home they know will likely escalate beyond their reach when they know it is listed below market.