It's interesting that the best articles I've read about the foreclosure crisis have both been in The New Yorker. The first one was a couple of months ago, and was called "The Ponzi State". It was a long article about homes in Florida, and the various reasons that people ended up getting into trouble, or profiting from the trouble of others. This week, there was an article called "Cash for Keys", about a real estate agent in California who specializes in REO (real estate owned) properties being sold by banks. It does a good job of showing why it makes sense for some people to fight foreclosure, and for others to give in and turn the house over to the lender. One banker was quoted as saying that this particular agent was effective because he priced homes aggressively, thereby getting them to stand out among so many others.
Today I heard from a buyer who illustrated why the aggressive pricing policy works. He's been looking at homes in Clinton, and one just came onto the market recently in the neighborhood where several others have been languishing. It seemed to this buyer to be "a lot of house for the money, and $15,000 less than the three others nearby". He reported that there was a lot of action on this newest listing, with little to none on the more expensive ones. One might suppose that a difference of less than 5% would not deter buyers from looking at some homes and not others, but it does appear that such is the case. Sellers, take heed--you may think that you're leaving room for negotiation, but instead you may be causing buyers to leave, period.