The strategy is to create a sort of blind auction where buyers try to find a number that the sellers will actually accept and a number that is higher than all the other bids. It’s a local quirk that everyone seems to recognize, it’s just the way things are done here.
Jodi Nishimura, an Oakland-based Compass agent, said she was surprised when she moved to the area from New York City in 2002 and found that the ads were priced below their value, usually about 10% less at the time. “It was not common for homes to exceed the list by 50%,” she said. The Covid housing boom has made matters worse, she said, with some homes – especially those with large outdoor space – selling for huge prices, well above their advertised prices.
Buyers tend to hate undervaluation – describing it as anything from “sick game” to “weird”. But brokers say it works well for sellers. “The sellers want to keep the auction war blind,” said Mr. Stea, who had the Rockridge house that sold for over a million dollars compared to demand. “But that puts buyers at a disadvantage because they are shooting in the dark.”
DJ Grubb, president of The Grubb Company, a local brokerage firm, also attributed the extreme gap between list prices and selling prices to a rapidly changing market where home values have climbed rapidly, making it difficult the precise determination of the value of the houses.
Agents in the region use a classic “merchandising strategy” but take it to the extreme, says Grubb. Instead of using the retail trick of pricing a $ 1 million to $ 999,000 product, agents in the area typically advise sellers to price a $ 1 million home to capture buyers. shopping in the $ 750,000 price range, which translates to a list price of $ 749,000. This way, multiple bids will come in with the winning bid usually around $ 1 million. If enough offers come in, one of them could be as high as $ 1.2 million – maybe from someone willing to pay a premium to end their grueling search for housing, or from someone else. ‘one that assumes that home values will soon rise to what they paid for.
When Katy Anderson bought her house in Upper Rockridge about 10 years ago, she and her husband renovated it from the ground up, including removing a swimming pool to create a large, flat lawn that her children used as a soccer field. Ms Anderson said they were prepared to “cash in” and buy superior housing in nearby Orinda, a suburb, and pocket some of the equity as a financial cushion.
Ms. Anderson, who is also a real estate agent at Compass, paid $ 786,000 for the house ten years ago and spent about $ 500,000 on the renovation. She thought they might go over $ 2 million for the 3,000 square foot house – then saw a neighboring house sell for $ 2.6 million.