San Francisco Bay Area Homes’ Underpriced Homes Spur Bidding Wars
As recently reported in the New York Times, Californian Kim Rohrer and her family were seeking to move from their two-bedroom Berkeley rental duplex when they found a bigger home for sale.
The three-bedroom, two-bathroom chalet-style house was listed at $799,000, which was fairly reasonably-priced for the Berkeley area.
Despite the house needing significant work, including plumbing work, the couple was not fazed by that.
“It was like a dream house,” said Ms. Rohrer, who works in human resources for a tech company.
Even though the couple offered above the asking price of $850,000, they were aware that there would be multiple offers. However, they needed to make sure to save money for repairs.
Their offer fell through and they didn’t even come close to the final bid.
The home ended up selling for $1.4 million, which is almost double its asking price.
As the housing market came back to life across the country this past spring, with demand outpacing the supply of homes, the typical thing to see was open houses with long lines, intense bidding wars and homes selling for well above asking price.
According to data from Zillow.com, 37 percent of homes currently sell for over the asking price, which is up from 13 percent in 2018. The typical buyer pays 0.6 percent above asking, according to Realtor.com, based on a median list price nationwide of $367,000.
However, there is nowhere else in the United States that homes sell for more than asking price than in Berkeley, where about 80 percent of homes sell above the listed price, according to Zillow.
Berkeley also has the highest overbid scenario in the country, according to Realtor.com, with listings selling for an average of 19 percent over asking.
In nearby Oakland, the typical home goes for 11.2 percent above asking. Many, like the one Ms. Rohrer put an offer on go for a lot more.
Daniel Stea, of Stea Realty Group, recently listed a home in Rockridge, which is a neighborhood on the border of Oakland and Berkeley known for its Craftsman homes and quick BART commute into San Francisco.
The 2,400-square-foot four-bedroom brown-shingle Craftsman has a spacious renovated kitchen and a large backyard with a detached office studio.
Mr. Stea listed it for $1.795 million, but it sold for $3.075 million.
Homes in the Bay Area sell for so much more than their listed price because brokers purposely underprice listings to attain as many offers as possible.
Mr. Stea said that while he was shocked the Rockridge home went for as much as it did, he knew it would go for well above the asking price.
“I’m a true believer in that the market will always tell the truth,” he said.
Jodi Nishimura, a Compass agent based in Oakland, said she was not expecting listings being priced lower than their worth when she moved to the area from New York in 2002.
“It wasn’t common to see homes go for 50 percent over the listing,” she said.
She said the Covid housing boom has made things worse, with some homes selling for big premiums, well above their listed prices.
Buyers don’t like it, but brokers think it works well for sellers.
“Sellers want to keep the bidding war blind,” said Mr. Stea, who had the Rockridge house that sold for more than $1 million over asking. “But it disfavors buyers because they’re shooting in the dark.”
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