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Prices of Homes

by sfishome on January 26, 2006

San Francisco homes are priced BELOW market when they are listed for sale. Yes, that’s right. If you’re going to fight it, you can’t buy here. It’s pretty normal for first time home buyers to rail against this pricing tactic. And that’s what it is, a tactic, or a strategy. We (SF real estate agents) under-price homes in hopes of generating lots of traffic and multiple offers.

First time home buyers often get mad when they discover that $599,000 really means $660,000 or sometimes $730,000. To discover the real value of a home you’re interested in you need an expert to run a comparable report. Called “CMA” for Comparative Market Analysis, these look at nearby, similar homes that have sold very recently. If 5 similar homes sold between $625,000 and $675,000 in the last 3 months, then the home is worth between $625,000 and $675,000. Sorry, you can’t have it for $599,000 because 10 other buyers will out-bid you. An “expert” can be an appraiser, but is usually a local real estate agent who has access to complete sales and listing data, and is good at crunching numbers and determining which homes really are comparable.

The reason I’m writing this post isn’t for you, the first time San Francisco home buyer. It’s for the out of town agent who is advising their client. You can’t, and you shouldn’t. Our market isn’t like yours, and your access to home sales data is probably pretty poor. On one home I’ve had two problems. First is the Sacramento agent who helped my client buy a home up there before putting her home here on the market. That agent led her to believe her $800,000 to $850,000 home was worth at least $900,000. Now I’ve got a much closer East Bay agent advising his Buyer clients to make a $750,000 offer when I’ve priced the home at $795,000. When I called the agent to let him know that my Seller was actually offended by the offer, he was dumbfounded saying he had run comparables. Yes, there were nearby sort of similar homes that sold for an average of $750,000, but they were actually quite different. Just a few blocks away is “the other side of the tracks” according to neighbors. That’s probably a $50,000 or more difference. My client’s home also has views probably worth $50,000, etc, etc.

So we’ll see what happens with these Buyers. They’ll probably pass on a great house all because they can’t recover from the shock of the “real” price. So, you out of town (including across the Bay) real estate agents. Please refer your SF buyer to an SF agent.

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