Sellers are underpricing their listings to get the maximum eyes on their properties. Maximum number of eye translates into the highest prices.
37% of For-Sale Homes Nationwide Now Sell Over Asking Prices
Three new norms have taken hold in this under-supplied, over-demanded housing market…open houses with lines of people out the door who are clamoring to buy, bidding wars and homes selling for unimagined amounts well over listing prices.
According to Zillow data, 37% of homes nationwide now sell for prices well above asking prices, up from 13% in 2018. And, according to data from Realtor.com, the typical buyer nationwide pays approximately +$2,200 over the listing price, or +0.6%, based on a median price of $367,000.
North Bay Area Has Highest Percentages of Homes Selling Over List Prices
A whopping 80% of for-sale homes in Berkeley CA sell for more than listing prices, according to Zillow. Couple Berkeley’s highest-in-the-county overbidding situation with listings selling for an average of +19% over asking prices, according to Realtor.com, and you have happy sellers.
In Oakland, Berkeley’s next town neighbor, over 70% of for-sale homes sell over list prices. The typical for-sale house in Oakland goes for +11.2% over listing price.
And these percentages are just averages. In some cases, for-sale homes in Berkeley and/or Oakland go for double the listing price and/or upwards of $1M over the listing price.
Agents/Brokers in Bay Area Intentionally Underprice Listings
Underpricing is a strategy used in th Bay Area to get as many eyes on and as many offers for a property. And guess what? It works.
“Sellers,” according to Jodi Nishimuara, an agent with Compass, “want to keep the bidding war blind. But (underpricing) disfavors buyers because they’re shooting in the dark.”
Underpricing Strategy Works for Sellers, Not for Buyers
Much like blind auctions run by large auction outfits where buyers try to figure out a number the seller would accept as well as a number that’s higher than other offers, this underpricing strategy has been working for sellers, at least in the San Francisco Bay Area.
Katy Anderson, another agent with Compass who underpriced her own home as a seller and reaped a final sale price beyond her “wildest expectations”, said, “You can never price a home too low, or that’s sort of the theory.” Just as in retail clothing stores, Anderson added, “…at the end of the day, which area of the store gets more attention? It’s always the sale rack.”
Underpricing Strategy May Benefit Agents
Though many Bay Area sellers have been getting “beyond-imagination” closing prices by using this underpricing strategy, buyers, according to Anderson, “are sick of it.” Why? The process is exhausting and disappointing for potential buyers losing out on homes.
For agents, however, this underpricing strategy can make their role more important and more necessary. Agents know what a particular listing is worth. Agents know how to use this underpricing strategy in bidding wars to their buyers’ advantage.
By working with agents who can help guide them through underpricing and bidding wars, those potential buyers may actually be able to buy a house.
Thanks to Zillow, Realtor.com and The New York Times.