Rapidly-increasing home prices are nothing new in San Diego:
The term ‘chasing the market’ usually applies to sellers in a down market when they don’t lower their price fast enough to get ahead of the new listings coming on that are under-cutting them.
The reverse is also true about home buyers in a hot market.
Those in the hunt for weeks or months who have lost several bidding wars are watching each new listing get priced higher and higher, and their frustration mounts as they struggle to get ahead of the trend. Some buyers can get priced out altogether, and others buck up and pay an exorbitant price just to end their misery and get on with life.
It just happened like that in La Costa Oaks.
I had two great comps nearby when when we priced our 7168 Sitio Corazon listing at $1,379,000, with the latest being right across the street. Ours had the master suite downstairs, which isn’t as popular with families with young kids – and the 3,563sf plan has the master upstairs with the rest of the kids’ bedrooms.
It’s very unusual in the low-inventory era to have four sales within five months – especially this close together. You can see what happens – they feed on each other, with the intensity building with each sale.
After my efficient and timely bidding war where I gave all contenders the chance to submit their highest-and-best offers, we ended up with three. Two were $1,450,000, and the winner was a decisive $1,470,000 with no appraisal contingency and a 30-day rentback for my sellers.
Many of the buyers who saw my listing went across the street when 7177 Sitio Corazon hit the market a week later. I told the listing agent and the seven buyer-agents who contacted me that our sales price was $1,470,000, which helped feed the frenzy. With it being the more desirable floor plan and full transparency about how hot the market is, buyers went crazy – and there were eight offers.
The buyers who won with an offer of $1,600,000 were one of my $1,450,000 offers.
They were tired of losing, apparently, and added enough mustard to clinch it – about 10% over list price, and more than 23% above a nearby model-match sale in August!
Get Good Help!
The days of wondering how much of a discount you could get off the list price have been replaced with hoping to limit how much OVER the list price you are willing to pay. For buyers, how much to pay is relative to how well the home fits all of your needs, and how much you love it.
Here’s a gauge of how to determine how much to offer:
- For home you only like a lot, try to keep the premium-above-list to 5% or less.
- The average winner pays 6% to 7% over the asking price.
- The top-rated masterpieces are fetching 10% (or more) above list price!
Any decent property that’s fixed up and priced right should go pending in 7-10 days.
If you are a dare-devil, one strategy to consider is waiting a couple of weeks after a home is listed for sale. If it hasn’t gone pending, then the condition, price, or agent was a problem and by then, the herd has cleared out so you should have a little more negotiating power.
But if you think the new listing is a hot one, then you better get over there right away for a look.
- Ask if the listing agent has a strategy for determining the winner. Most agents will spread the offers out on the coffee table, and let the sellers pick one. If that’s the case, the terms of price, down payment, waived contingencies, and escrow time will probably be what determines the winner – with influence from #2:
- Any compliments you can bestow on the sellers and listing agent in person or with a love letter can go a long way. The love letters have come under scrutiny lately, and I totally agree that sellers and agents will discriminate consciously, or sub-consciously. Just use your first names and no photos.
- Know what you are looking at, and don’t overpay for fixers. You may see crowds, but almost all buyers will pass on the fixers. If you aren’t that familiar with spotting needed repairs and identifying costs, then work with someone who is.
- Waiving contingencies. It’s uncomfortable, but your competitors are doing it. All four of the Crater Rim buyers who were willing to pay $90,000+ over the list price waived their appraisal contingency.
- If you know you are going to buy the house regardless, make your deposit non-refundable and release it to the sellers within seven days after acceptance.
- Have your mortgage pre-approved by a well-known and respected lender who will call the listing agent to sell them on your qualifications. If there are cash offers, this is about your only hope to compete.
- The listing agent has influence on the selection, and prefers a buyer’s agent they know and trust. The buyer’s agent is smart to provide their own qualifications that demonstrate they can close a deal.
If all else is equal, the homeowners want to sell to someone who will close on time with minimal problems. Someone who makes it easy. Somebody they like. Buyers are smart to make a lasting impression on the sellers or listing agent, because in a close race, how the sellers feel about the buyers will decide it.
Since 2017, there have been 15 RSF sales over $10,000,000, and this house accounts for three of them! It’s a remarkable record that is unlikely to be broken:
April 2017: $10,600,000
December 2017: $10,850,000
January 2021: $10,850,000
It’s also a reminder that the frenzy and rapid price increases are limited to the Under-$2,000,000 market.
Have you been thinking about getting a great realtor to help you buy a home, but feel loyal to your Aunt Bea or a friend who just started in the business? This story is for you.
We received five offers on our new listing over the weekend. The lowest offer was written by a new agent who is in her brokerage’s mentor program, and even her mentor attended the showing which made me feel like this was important. Typically, the mentors are has-beens who can’t hack it any more on the front lines, and instead want to be pseudo-coaches for new agents and get a chunk of their commissions.
I told both the agent and the mentor that we had already received multiple offers over list price, and to make their highest-and-best offer. Once received, I asked specifically, “is this your highest-and-best offer?”
They never responded.
We had three buyers who were willing to pay at least $90,000 over the list price, so I engaged them in a second round to determine the winner.
We accepted an offer that was $100,000+ over the $1,100,000 list price.
Yesterday, the new agent got back to me and said her buyers are willing to match our high offer.
Even though her buyers must have been extremely interested in the house, the advice they received didn’t even put them in contention at the time. And now it’s too late.
Immediate buyer demand requires, and deserves, immediate great advice.
I regularly meet people for the first time at a house in which they have interest – and I proceed to discuss the state of the market, evaluate the condition of the house and repair costs, and then pinpoint the value of the home based on comps and suggest a strategy to win it. There’s a handful of my clients who bought the first house they saw.
Get Good Help!
For the skeptical who want proof of the demand, here’s the turnout over the weekend:
The contest for guessing the number of listings in January is now closed. We are running about 20% behind last January’s count, so the few sellers who are willing to brave the early-2021 market will do nicely.
We had 31 showings and five offers on our new listing over the weekend, and three of them were willing to pay $90,000 over list!
If you are the kind of buyer who wants to use logic and common sense – and tie your offer price to the comps – well, this isn’t the market for you. Pay tomorrow’s prices, today!
The worst thing for home sellers is to be unprepared for the immediate reaction from buyers.
Those who haven’t sold a home in years will sign a listing agreement and settle in for what they expect will be a few months of marketing and showings until that nice young couple with 2.2 kids comes along to relieve them of the family homestead. Virtually every seller says, “I’m in no hurry!”
But the motivated buyers – those who pay the most – are scanning their search portals every minute, and when they see a possible contender, they react!
We have 29 showings this weekend of our new listing, and have received five offers – all over list price.
Be Ready, and Get Good Help!
The seven showings of our new listing yesterday went well. People generally show up on time and understand the predicament that the demand is overwhelming the supply. We’ve received two offers, and we are way over list price already.
There tends to be some standing around, so I like to engage with agents about how my slow-motion auction process works. They appreciate the transparency, and tells stories about how other agents are handling their showings. I heard a story about one listing agent who demands that agents submit the buyer’s preapproval letter and proof of funds JUST TO BE PUT ON A WAITING LIST TO SHOW, and another where no human interaction was allowed (which is common).
In my case, you deal with me, and I make myself available by phone, text, or email. I want to give every buyer ample opportunity to buy the home – isn’t that what you want in your listing agent?
Get Good Help!
Our new listing hit the MLS about 5:30pm yesterday. By 9:15pm, I received six requests to show it, and another three requests before 8am this morning!
The zestimates and Redfin estimates are really a joke now. If they are willing to derive their number off the list price and try to make you think it is the actual value, what else are they willing to do to you?
Happy New Year…..how about a contest to get it started?
My case for a full-blown frenzy is based on having additional supply to fuel the seemingly-insatiable demand brought on by the pandemic – having more homes for sale will help spike sales and prices. Betting on more people selling their piece of paradise sounds insane as the coronavirus rages throughout the region, but we’re overdue – and there are a number of reasons why it could happen:
We will know how the selling season will unravel just by the number of new listings in January.
Here is the history:
NSDCC January Listings
The range is 275-471, the median is 412, and the average is 396 listings. Last year we had 5% fewer listings, but 13% more sales than in 2019. My 2021 prediction is 10% more NSDCC listings year-over-year, 10% more sales, and a 10% increase in the NSDCC median sales price.
OUR CONTEST: GUESS THE NUMBER OF NSDCC LISTINGS IN JANUARY, 2021!
In 2020, saw a big drop-off in January listings year-over-year (-16%), and that was before the pandemic. If we see a similar amount, or fewer, then prices will go nuts but be limited to the neighborhoods that actually have sales, and the lucky few who can win a bidding war.
If we have a surge in listings, then more of the demand will be satisfied and the frenzy will reach more areas – and prices go up faster because of the additional comps, all of which should close for a higher price than the last sale.
Having a contest based on the number of January listings will help to keep our focus on one of the leading indicators for the 2021 selling season.
The winner will be who guesses the closest (above or below) to the actual number of January listings as counted on the morning of February 15th. The winner will receive two tickets to a day at the U.S. Open at Torrey Pines, June 17-20, and four tickets to a game with World-Series favorite, the San Diego Padres!
I have purchased tickets to both events already, so as long as the ‘rona cooperates and fans are allowed, we will have prizes. Neither the PGA or the Padres have committed to a set policy on fans yet though, so if they both cancel out then I’ll think of something else for a prize.
Our Padres tickets aren’t front row, but they are decent:
Leave your guess in the the comment section on how many NSDCC SFR listings we’ll have in January!