There had to be skeptics to my Los Altos Adventure last weekend.
Did you mis-price the houseby more than a million dollars on purpose – or just by accident? Come on – you were 440 miles out of your normal market area….dude….you got lucky!!
I like to pay close attention to the market activity in the days before inputting a new listing. This was the latest listing by the guy who has just captured nationwide attention of his lowball $10,000-commission offer to the buyer-agents. As of Wednesday night, this was still active, and I told my sister that I didn’t want to compete directly because mine would help to sell his. If it was still an active listing when I woke up on Thursday, then I’m not coming up and we will postpone the listing for at least two weeks due to weather:
Miraculously, when I woke up the listing was marked pending – so I left for Los Altos.
All I had to be was the most attractive new listing in a very exclusive area (Nvidia is based in San Jose). There had to be losers from the Parma bidding war who were motivated to buy the next one, and there was nothing else for sale at this price point.
I was talking it up with every agent who came to my open house, and eventually I found an agent who was in the same office as the buyer-agent of Parma – and they confirmed that it sold for $4,150,000! Do you think I told that to every person I met over the next 48 hours….yes!
Let’s note my options: Either price attractively and have buyers bid it up, or price at retail and wait.
Here’s an example. The size of house and lot are pretty similar to mine, and it’s a busy street too. How are they doing? They listed for $3,998,000, and 30 days later they are still unsold:
The more obstacles that need to be overcome, the more attractive the price needs to be.
I’ve been showing houses to buyers the last couple of days, and this theory has never been more clear. As we walk into a house that appears to be priced at the top of the range (or higher), the skepticism builds with every step – and we’re looking for any reason NOT to buy.
But when you walk into an attractively-priced home and see defects, they just confirm why the price is attractive – buyers don’t expect perfection when the price is attractive!
What happens once a home hits the open market depends on the listing agent. Yesterday, one was blaring his Jesus music, and another was chatting with the sellers who were still hanging around even though the open house started 15 minutes earier. Most listing agents aren’t implementing any bidding-war strategy – heck, yesterday there was one agent who didn’t even know the price of the home!
In reviewing the Los Altos comps, about half of them had closed over the list price, so I knew it was going to be hot. I knew that I was selling a house that looked all original, and was on a busy street. So we priced it attractively and I aggressively implemented my tried-and-true bidding war strategy that works!
We can expect that the election season will be like no other in the history of the USA!
Prepare accordingly!
Can you imagine how this will play out? If Biden wins, there will be a civil war. If Trump wins, he’s promised that there will be full chaos on Day One. We can write off the 4Q24, and maybe more!
Once a home is for sale but not selling, how do you know what to do?
Both buyers and sellers can apply my List-Price Accuracy Gauge:
Once the home is on the open market, if it is……
Getting visitors and offers, you are within 5% of being right on price.
Getting visitors but no offers, you are 5% to 10% wrong on price.
Not getting visitors, then you are more than 10% wrong on price.
It’s nothing personal, it’s just a simple guide to know how close the price is to being right.
The serious buyers rush out the first week to take a look, but after that it’s crickets, with only an occasional visitor. It is tough for sellers to cope, or make adjustments. But once the initial urgency has expired, you have to do something – don’t just sit there.
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How quickly should sellers make adjustments? The DOM clock is ticking!
0-14 days on market – Hot property, and when the sellers have their maximum negotiating power.
15-30 days on market – Buyers get suspicious, want to pay under list.
30+ days on market – Buyers will be expecting deep discounts, or ignore it altogether.
After being unsold for two weeks, sellers will suspect that something is wrong. But it is natural to resist changing the price and instead blame everything else – especially the listing agent.
Sellers, and agents, need to shake that off and act quickly to keep the urgency higher. The first price reduction should be for at least 5% and happen in the first 15-30 days for maximum effectiveness. If the home doesn’t sell in the next two weeks, then another 5% is in order, and by then the fluff is eliminated.
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Where do sellers go wrong? They don’t properly price in the negatives.
Typically sellers just pick apart the comps to convince themselves why their home is the best around, and then settle on a list price that will show everyone who’s the boss. If you don’t have any negatives, then you probably will get your price! But typically sellers are forced to come to grips with the negatives of their house, and adjust accordingly.
Do sellers have to lower their price? No, not neccesarily.
There are other alternatives:
1. Make your house easier to show. Listing agents who insist on buyers jumping several hurdles just to see the home aren’t realistic about today’s market conditions. Make the home easy to see!
2. Fix the problems. New carpet and paint is the best thing you can do: 1) it looks clean, 2) it smells new, 3) you have to clean out your house to install it, and 4) you are managing a business transaction now – it is the logical solution. Utilize staging too.
3. Improve the Internet presence. Have at least a 12-25 hi-res photos and a simple youtube tour.
4.Wait for the market to catch up. If unsold for 60+ days, cancel and try again later – probably next year.
5. Reset the Days-on-Market stat. As long as the MLS allows agents to refresh their listings, then it’s in the best interest of the seller to reset the DOM. It is a gimmick, and instead sellers should concentrate on creating real value for buyers – that’s what will cause them to pay more.
The longer it takes to sell, the more discount the buyers will be expecting – usually about a 1% off for each week on the market. When other homes are flying off the market, the buyers’ obvious conclusion is that your price is wrong, and they load up the lowball offers.
Even if you complete one or all of the five ideas above, don’t be surprised if you need to lower the price too. Keep it attractive!
This video includes a tour of the house so you can see what $4,200,000 gets you in Silicon Valley. The eight pine trees are protected, and thankfully, they are isolated into two extreme areas:
Once we raised the list price yesterday, the message spread quickly. I still had a good turnout at my open house – about half of the amount of attendees that I had on Friday – but many came just to ask why the price changed.
Agents appreciated the transparency though, and they were quick to realize the benefits. If your buyer is only interested in paying $3-something, there is no need to go through the process of making an offer and getting your hopes up if there’s no chance of being in contention.
It’s part of the slow-motion auction. Give everyone a shot to buy the home and have full transparency propel the outcome.
I don’t make it a habit to drive around the state looking for sales – my uncle lived here for 47 years and survived the last couple of years by himself. Every 90-year old needs to have people around!
He moved to a senior facility in Marin County to be closer to my mom and sister, plus have many other seniors around for engagement. Today, he’s entered into the big Saturday Putting Contest, and tomorrow he’s going with a group to the symphony!
These Palo Alto guys have been making national headlines since they rolled out their reduced-commission program last week. They are offering a $10,000 fee to buyer-agents, instead of a percentage, AND encouraging buyers to come directly to the listing agent to avoid paying any fees (which is my beef).
Why would a high-end independent brokerage that sold 100 homes in the last 12 months – mostly in the $3,000,000 to $10,000,000 range (with sales of $40,000,000 and $44,000,000 too) – feel the need to effectively shut out their fellow real estate agents? Beats me.
Last week, the Department of Justice stated that commissions should be decoupled and NO fee be offered up front to buyer-agents by the seller or listing agent (though they did agree that buyer-agents can include a seller-paid commission in their buyer’s offer).
What gets lost in the discussion is the 120-year history of broker cooperation – where other agents can sell my listings, and I can sell theirs. It is a terrific system that best serves the sellers and buyers, which is our fiduciary duty.
But greed and market-share dominance is pushing fiduciary duty to the sidelines. Instead, brokerages are taking advantage of the current uncertainty to craft a quasi-single-agency package that effectively shuts out the cooperating buyer-agents under the guise of saving the seller money. Is it in the seller’s best interest to discourage the outside buyer-agents?
This is one of their first listings to hit the open market that offered their $10,000 fee to buyer-agents, and it went pending in seven days:
Agents will give you all sorts of mumbo-jumbo on why you should hire them, with the most favorite being that they are the “Local Expert”. Agents were local tour-guides before the internet – back when buyers would roll into town and plunk down their $72,500 for a house without knowing too much. But America was more innocent then.
Today, what matters more than anything is whether an agent can get people to the finish line.
If you have a particular agent in mind, all you have to do is input their name here:
Zillow will give you the sales history for any agent in America who has a webpage with them! Draw your own conclusions, but just seeing how many sales they have closed in the last 12 months is a good start.
Every agent can pull data from the MLS too.
It took me a minute to produce and share our listing history from the last 24 months with a seller:
The blip in active listings over the last week isn’t too concerning and could just be from the weather.
The count of active listings is a good indicator of the demand though. During the mega-frenzy conditions from late-2020 through early-2022, you can see that the new listings were being gobbled up as quickly as they came on the market, and there was no build-up of the supply. Last year, the demand was hot enough in the early months that the active-listing counts were fairly flat too.
If this year’s count of active listings surges above 400, it will mean that we are exiting the frenzy days, and the market’s normalization is underway.
It is subject to the overall number of listings, and I’ll reuse yesterday’s chart to show the flow:
NSDCC Listings and Sales, Jan 1 – Feb 15
The total number of listings in 2024 is still in the frenzy range.
It’s the number of active listings that help demonstrate the velocity of the demand. Are they being gobbled up as fast as they hit the market like in recent years, leaving the number of actives fairly steady? Or are the actives starting to pile up, like they used to do? (see the 2019 green line in graph at top)
This is how we will know where the Spring Selling Season is going.
Buyers already have reason to be cautious and wait patiently because Powell opened his big yap and said he was going to lower his rate THREE times in 2024.
If the active listings break out of the frenzy range and start stacking up unsold, it will be irresistible for buyers to wait longer to see if sellers capitulate on price, while hoping rates might come down too.
Want to know where the market is going? Just watch the number/trend of the active listings!
