While in most of the United States, homes tend to sell at around or slightly below their list price, this is not the case in the Bay Area. Bay Area properties, on average, sell for 10-20% above their list price, although homes can go for 50%+ of list price. Part of this is due to the highly competitive environment for Bay Area real estate, and part of it is due to homes being listed at a discount to their intended sales price. This can be frustrating for buyers who find the perfect home which falls within their budget, only to submit an offer at the list price, and have numerous other buyers submit offers at a premium to the list price.
With such little available inventory here in the Bay Area, listing agents are fairly confident that their homes will receive competitive offers after just two weekends’ of open homes. To maximize the home’s selling price, they want the “bidding” to seem very competitive and induce the more motivated buyers to submit generous offers. By listing a home at a slight discount to what they think the home is worth, they induce more buyers into the process, and thus create a more competitive environment.
Some listing agents take this approach to the extreme and will list a home at a 25%+ discount to the home’s true value. Listing a home so low eliminates any reference points for buyers to use when estimating bidding range. The “bid 15% above list price” rule of thumb leads to a valuation that is obviously below what the home is worth. They hope that one (or a few) buyer over-values the property and submits an offer well above the fair market value.
When working out what price to offer on a home, and what premium above list price, it is important to do a detailed comparables analysis to understand local market valuation trends. If you would like Unlocked to perform a Custom Valuation Report on a particular property, please get in contact with us.