SF Bay Area Housing: Listing agent underpricing

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coldplay221
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SF Bay Area Housing: Listing agent underpricing

Post by coldplay221 »

Hi,

We are in the market in the much inflated SF South Bay Area housing market.

From the time I started, last November, I am yet to see a single pricing in this area that is actually reflecting the comps around the area at that time. My agent tells me that this is auction theory at work. People are pricing their houses deliberately lower knowing that they would like the buyers to get interested and offer and subsequently get into a bidding war with each other.

Being a noob in the housing market, is this a standard feature of the housing market?

Houses in Fremont and almost all reasonably good school districts of South Bay have a 70k-200k premium over their listing prices. This is plain disappointing and a waste of my time to even consider these houses as possible options to get involved in. This also keeps me in a constant state of wonder on what an agreeable price is for a house.

On a personal note:
I can afford a house right now, but I am not even sure whether I should play the Bay Area housing game at this time. We don't need the house, its a more nice to have. Also the rent that we are paying should get a decent 2-3 bedroom place in a terrible school district. But the financials for this are debatable. I feel if I buy there are a higher chances of me regretting the decision(due to the premium over list price - which itself is a conundrum) than of enjoying the house over the next 5 years. Meanwhile the realtors are obviously convincing me that now is the time to buy and my rent is going to naught..what are the percentage of folks who regret not having bought earlier. :confused
EXH
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Re: SF Bay Area Housing: Listing agent underpricing

Post by EXH »

This is just the way it is in the Bay Area - you have to look at sale prices not list prices. It helps to go to lots of open houses then see the sale prices to get to know the market. Then it's just a crapshoot as to how you offer compared to everyone else, not to mention the counteroffer nonsense. I certainly wouldn't buy now unless you knew you were going to stay in the Bay Area for a good long while. I knew I had at least 10-15 years here so it made sense to buy, but if it was definitely less than this I would't have taken the financial risk (not to mention the pain in the butt of owning an ancient home that needs lots of maintenance!).
john94549
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

As noted, listing prices are usually just the "open" offer these days in the Bay Area. Back when I was in Law School, they tended to maintain that when you "offered" something or other at "X", and it was accepted, you had a deal. In Bay Area real estate, all bets (and normal rules of contract law) are off. I suspect folks (read:realtors) list purposefully low to generate interest, knowing a bidding war will ensue. It's weird, I know. I have yet to understand why an "all cash" acceptance of a listing price is not an enforceable deal.

Playing Judge Judy for the moment, if someone wandered into my courtroom with a listing saying "I'll sell you this house for "X"" and the other person came and said "I offered "X"", I'd give them the house.
Last edited by john94549 on Thu Mar 31, 2016 8:18 pm, edited 1 time in total.
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jfn111
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Re: SF Bay Area Housing: Listing agent underpricing

Post by jfn111 »

john94549 wrote:As noted, listing prices are usually just the "open" offer these days in the Bay Area. Back when I was in Law School, they tended to maintain that when you "offered" something or other at "X", and it was accepted, you had a deal. In Bay Area real estate, all bets (and normal rules of contract law) are off. I suspect folks (read:realtors) list purposefully low to generate interest, knowing a bidding war will ensue. It's weird, I know. I have yet to understand why an "all cash" acceptance of a listing price is not an enforceable deal.
I'd love to know also. I hate it when I represent an all cash offer at full listing price and walk away empty handed. :oops:
john94549
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

jfn111 wrote: I'd love to know also. I hate it when I represent an all cash offer at full listing price and walk away empty handed. :oops:
Mind you, I can appreciate the difference between an offer with even a modest contingency (which is merely a counter, under contract law) and a blanket acceptance. The latter forms a contract. Period, end of discussion.
stan1
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Re: SF Bay Area Housing: Listing agent underpricing

Post by stan1 »

You can:
1) Play the game and win (overpay for a house probably by waiving all contingencies)
2) Play the game and lose (get frustrated with not having offers accepted)
3) Sit on the sidelines (rent)
4) Play a game with better odds (move to flyover state)
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

Stan1, I can attest to the fact that selling an abode in a flyover state (Kansas in my case) is much more rational. A couple of months after my Mom died, I listed her house (open offer). Three bids the following week, best all cash offer accepted, closed in less than a month.
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indexfundfan
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Re: SF Bay Area Housing: Listing agent underpricing

Post by indexfundfan »

In many areas of the bay area housing market, the house prices are at all time high. This late spring, I am going to take this opportunity to exit the bay area, selling my primary residence and a rental to move to another state. Prices could continue to go higher next year but I think I have enough of a good run. The excess equity will go into my portfolio.

I have talked to a couple of agents who are vying to get my listings. They are all recommending to list at the lower end of perceived market value to get the crowds in.
My signature has been deleted.
john94549
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

indexfundfan wrote:In many areas of the bay area housing market, the house prices are at all time high. This late spring, I am going to take this opportunity to exit the bay area, selling my primary residence and a rental to move to another state. Prices could continue to go higher next year but I think I have enough of a good run. The excess equity will go into my portfolio.

I have talked to a couple of agents who are vying to get my listings. They are all recommending to list at the lower end of perceived market value to get the crowds in.
Good luck and may opportunities abound. Our kids and grandchildren are nearby, so I doubt we'll move. As to home prices, it's right up there with stock prices, once you sell. Murphy's Law: once you sell anything, it goes up in price. Once you buy anything, it goes down in price.
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Watty
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Re: SF Bay Area Housing: Listing agent underpricing

Post by Watty »

There are several other recent threads about Bay Area house prices that you can find and read.
coldplay221 wrote:Being a noob in the housing market, is this a standard feature of the housing market?
That is very unusual but it was happening in a lot of places like in Florida before the last housing bubble burst.
coldplay221 wrote:..what are the percentage of folks who regret not having bought earlier.
According to this like the boom phase of a bubble is; (my bold)
Boom: Prices rise slowly at first, following a displacement, but then gain momentum as more and more participants enter the market, setting the stage for the boom phase. During this phase, the asset in question attracts widespread media coverage. Fear of missing out on what could be an once-in-a-lifetime opportunity spurs more speculation, drawing an increasing number of participants into the fold.
http://www.investopedia.com/articles/st ... bubble.asp
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Watty
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Re: SF Bay Area Housing: Listing agent underpricing

Post by Watty »

indexfundfan wrote:In many areas of the bay area housing market, the house prices are at all time high. This late spring, I am going to take this opportunity to exit the bay area, selling my primary residence and a rental to move to another state.
That would be phase four in my link above;
Profit Taking: By this time, the smart money – heeding the warning signs – is generally selling out positions and taking profits. But estimating the exact time when a bubble is due to collapse can be a difficult exercise and extremely hazardous to one's financial health, because, as John Maynard Keynes put it, "the markets can stay irrational longer than you can stay solvent."
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Re: SF Bay Area Housing: Listing agent underpricing

Post by puma »

john94549 wrote:Mind you, I can appreciate the difference between an offer with even a modest contingency (which is merely a counter, under contract law) and a blanket acceptance. The latter forms a contract. Period, end of discussion.
john94549, are you saying just because the seller chose to list a property on a multiple listing service, there is an implicit contract between the seller and any potential buyer who presents a written offer for full list price without contingencies? Does this apply to other sales as well? i.e., if I list something on Craigslist and change my mind later, but a buyer emails me agreeing to pay asked price before I could pull the ad, am I contractually obligated to sell to that buyer?

My understanding is there is no contract until seller accepts a buyer's written offer in writing. There may be a listing agreement between the seller and the seller's agent that forces the seller to pay the agent's commission, but I don't see how you can force a seller to sell a property to the buyer. Of course, you seem to be a lawyer, and I am not, and you probably have infinitely better understanding of contract law.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

Watty, the Bay Area housing market is so in a bubble. Seriously, a one bedroom one bath in San Francisco is $3500/mo plus. A three BR/2BA which would sell in Oklahoma City for $200,000, add a zero. $2 million hereabouts. It's nuts.

Folks don't recognize a bubble until it bursts. Well, folks in the Bay Area, it's nuts.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

puma, I'm merely suggesting my angst. A person who "lists" a house at a certain price, said price accepted with no contingencies, should be sold to the person offering said price.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by puma »

john94549 wrote:puma, I'm merely suggesting my angst. A person who "lists" a house at a certain price, said price accepted with no contingencies, should be sold to the person offering said price.
I am totally with you on that. It is definitely frustrating when you make a full list price or above offer without contingencies, and the seller decides to still wait some more because it is still lesser than a price they have in mind.
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Watty
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Re: SF Bay Area Housing: Listing agent underpricing

Post by Watty »

puma wrote:
john94549 wrote:puma, I'm merely suggesting my angst. A person who "lists" a house at a certain price, said price accepted with no contingencies, should be sold to the person offering said price.
I am totally with you on that. It is definitely frustrating when you make a full list price or above offer without contingencies, and the seller decides to still wait some more because it is still lesser than a price they have in mind.
It would be interesting to hear what a lawyer would say about that being cause for a discrimination lawsuit if the person making the offer was a member of a protected minority.
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Watty
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Re: SF Bay Area Housing: Listing agent underpricing

Post by Watty »

john94549 wrote:Watty, the Bay Area housing market is so in a bubble. Seriously, a one bedroom one bath in San Francisco is $3500/mo plus. A three BR/2BA which would sell in Oklahoma City for $200,000, add a zero. $2 million hereabouts. It's nuts.

Folks don't recognize a bubble until it bursts. Well, folks in the Bay Area, it's nuts.

I agree. :beer

Here in Atlanta you could get a pretty decent house in a decent area with good schools for $200K too. Some parts of San Francisco are indeed very prime areas for a reason but 95%+ of the housing in the Bay Area is more like any cities suburban sprawl.

It was on other message boards but I remember the dot-com bubble posts and it felt a lot like this. Lots of people recognized that it was a bubble and were shaking their heads(including myself) only to have the dot-com stocks go way higher before the bubble burst. Of course the first few dips were just "buying opportunities." :oops:
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Re: SF Bay Area Housing: Listing agent underpricing

Post by Gnirk »

The same thing is happening in the Seattle market.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by zakinsf »

It's simply the nature of the market here, and you have to factor in the bid/ask when you decide which homes are realistic. There is really good data available on Redfin that can help you determine the bid/ask for each neighborhood that you're considering.
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coldplay221
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Re: SF Bay Area Housing: Listing agent underpricing

Post by coldplay221 »

Thanks for the link Watty, I am going to sit on the sidelines and continue watching.

Interestingly, I just found out that Redfin listing agents too don't use comps available to them. My agent said that Redfin too is just like any other agent, if everyone plays the auction game, they too will play the game. So much for the "Offered at:" tag.

A few days ago we attended an open house for a 4B/2b condo in Berryessa for 1.2M. We were looking for another property and unwittingly ended up at the this place. They had a barista on site making gourmet coffee drinks for visitors and had pastries from Paris Baguette. :sharebeer
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

Back many years ago, when I was in Law School, I took a course. I think it was called "Contracts". Two basic concepts: "offer" and "acceptance". If you can establish both, "pow" you have a contract. Statutes of frauds aside, you don't even need something in writing. Getting to the issue at hand,

1. A written listing agreement is an "offer", open and obvious to the world at large. It states, in plain language, "I will sell this house to you if you offer me my listing price".

2. Should a person walk up the next day and accept the listing price, with no contingencies, "pow", as we say. Offer and acceptance. Since a contract for the sale of real property usually requires an instrument in writing to bind both seller and buyer (that pesky Statute of Frauds), let's assume the acceptance is in writing.

Explain to me, a retired lawyer, why "pow" goes "poof".

Pacta Sunt Servanda ("contracts shall be obeyed"). Just because it's Latin doesn't mean it's a bad idea.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by jfn111 »

I posted a year or so ago that this bidding over the listing price wasn't common in Minnesota. That has changed in the last year. I just helped a client get a duplex where we had to offer $25,000 over the list price. This wasn't being sold by a private party, but rather, a local nonprofit. :shock:
More buyers than sellers causes this imbalance.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by adamthesmythe »

john94549 wrote:Back many years ago, when I was in Law School, I took a course. I think it was called "Contracts". Two basic concepts: "offer" and "acceptance". If you can establish both, "pow" you have a contract. Statutes of frauds aside, you don't even need something in writing. Getting to the issue at hand,

1. A written listing agreement is an "offer", open and obvious to the world at large. It states, in plain language, "I will sell this house to you if you offer me my listing price".

2. Should a person walk up the next day and accept the listing price, with no contingencies, "pow", as we say. Offer and acceptance. Since a contract for the sale of real property usually requires an instrument in writing to bind both seller and buyer (that pesky Statute of Frauds), let's assume the acceptance is in writing.

Explain to me, a retired lawyer, why "pow" goes "poof".

Pacta Sunt Servanda ("contracts shall be obeyed"). Just because it's Latin doesn't mean it's a bad idea.
Well I DIDN'T go to law school and I read that real estate contracts need to be written to be enforceable. An offer is not a written agreement between two parties.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by Shackleton »

john94549 wrote:Back many years ago, when I was in Law School, I took a course. I think it was called "Contracts". Two basic concepts: "offer" and "acceptance". If you can establish both, "pow" you have a contract. Statutes of frauds aside, you don't even need something in writing. Getting to the issue at hand,

1. A written listing agreement is an "offer", open and obvious to the world at large. It states, in plain language, "I will sell this house to you if you offer me my listing price".

2. Should a person walk up the next day and accept the listing price, with no contingencies, "pow", as we say. Offer and acceptance. Since a contract for the sale of real property usually requires an instrument in writing to bind both seller and buyer (that pesky Statute of Frauds), let's assume the acceptance is in writing.

Explain to me, a retired lawyer, why "pow" goes "poof".

Pacta Sunt Servanda ("contracts shall be obeyed"). Just because it's Latin doesn't mean it's a bad idea.
Many years ago, I took "Contracts Law" and my understanding is the same as John94549's. It is the same as the little price sign on the shelf at any store. It says the price for the widget you want is $8.99. Now imagine that this is the last widget they have in stock, and you walk up to the cashier to purchase and they say, "No, the price is now $12.99". That is actually forbidden under our current FTC Pricing Guidelines. So why is it allowed in real estate?
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Re: SF Bay Area Housing: Listing agent underpricing

Post by stan1 »

My good news story: I intentionally set the price a little low hoping to create interest and there also were some nearby houses that were closing at lower $/square foot than I hoped to get for ours. Listed house last summer on a Weds. Open house on Sunday. Had about 30 showings by Monday. Had 2 offers on Monday that were about $20K under asking (low ball). On Tuesday an offer $50K over asking came in after being told there were already other offers. The first two buyers ran away when they were told that and did not want to submit a BAFO. You can guess what we did. Appraisal came in at the offer price.

By coincidence on the Saturday before the open house we saw a new listing online and went to the open house that afternoon. We liked the house. We put in an offer at asking on Sunday evening. On Monday we were told there was a second offer and to submit a BAFO. We came in $30K over asking but didn't waive any contingencies (thankfully that hasn't become normal practice where we live). Got the house. Appraisal came in $30K lower than we bid. I told my Realtor that I thought our original asking price was fair and he said he'd do what he could. He more than earned his commission by getting the seller to accept our original offer (saving us $30K).
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
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Re: SF Bay Area Housing: Listing agent underpricing

Post by juanovo »

Not a lawyer but here is my take-

The list price is not an offer. It is an invitation to bid. Just like any auction can choose not to sell if the reserve is not met (from eBay to Sotheby's) the same is true on home sales. It sets expectations not offers a price. This is actually quite different from new home sales where one sees signs stating "offered at xxx" I may be wrong but I believe "offer" is a term of art and that is why the first "offer" always come from the buyer, not the seller.

Tl;dr auction pricing sets expectations and not offer prices.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by hoops777 »

The prices could go a little higher but are close to a top.There is a limit where people just say no and it is about there.I would not worry about prices going up much more.Down?Eventually but when is anybody's guess.Just my opinion of course.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

Adamthesmythe, I did specify a "written" listing agreement, did not I? Even after all these years, I have a passing knowledge of the Statute of Frauds. Granted, one cannot stand on a street corner and shout out "my home's for sale, make an offer" and wait for the first person to walk up and say "yup, I'll give you "X", seems like a nice house". The point being, a "written" listing and a "written" acceptance both satisfy the Statute of Frauds quite nicely.

I will never be able to wrap my feeble arms around bidding wars. Seriously, if somebody offers (in writing) their abode for sale at "X", and I offer (again, in writing) an acceptance, with no contingencies, why do we not have a deal?
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coldplay221
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Re: SF Bay Area Housing: Listing agent underpricing

Post by coldplay221 »

zakinsf wrote:It's simply the nature of the market here, and you have to factor in the bid/ask when you decide which homes are realistic. There is really good data available on Redfin that can help you determine the bid/ask for each neighborhood that you're considering.
This isn't true - I've put in offers over the "Zestimate" and the Redfin "estimate" and still got trumped. This either indicates that the estimate cannot keep up with the comps or is just plain wrong.

I agree with hoops777, there is a stage where regardless of pricing people will not offer - I like to believe we are quite close to that now.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by roymeo »

We gave up looking in SF after being outbid ~100K by people with briefcases of Remnibi and finally bought in Oakland.

What you're seeing is standard for the entire SF Bay Area (at least).

Agents can generally tell just looking at the numbers: 499 = attention seeking behavior, going to go for at least 630.

Trust your agent, or get one that you do trust.

As for all the 'well, according to generic contract law that I vaguely remember from school' discussion: What about all of those contingencies built into the contracts? We have inspections to get the results of and can walk away with our deposit if they reveal just about anything at all, and if a bank is involved there's another opportunity to walk away. And when the staged house is broken into because someone's got a master key for the fancy MLS electronic keybox and steals the staging furniture and brand new appliances there's a new condition that needs to be amicably resolved between the parties. It's a bit more complicated than buying a candy-bar...do they have a legal obligation to disclose that a man died holding that candy bar? Plus additional layers of legislation for big ticket items like lemon laws for cars, etc. There are more things in foundation and roof, Horatio, than are day dreamed in your law class.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

Roymeo, I attempted to take all the contingencies "off the table", as it were, in my hypothetical. I'm still having a hard time understanding why a full cash offer, with no contingencies, with both the listing and the acceptance in writing, is but a "slam-dunk". Might I say, I sold my Mom's house back in early 2014 "as is" and "make best offer". Closed in a month.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by CedarWaxWing »

An estimate is just that... an estimate of the price it may sell for. That does not mean that there are not valid reasons for you to pay that amount, more than that amount, or less. What it is worth to you may not be what it is worth to someone else.

The realtor showing you houses... is not likely going to put your interests above his/hers. Therefore, do not accept everything you are told as fact ... and consider what the realtor has to gain by your accepting something you were just told. They are in business to make money for them with the least amount of work... not to get you the best possible price.

In the past... If I am shown a house that is not what I said I was looking for ... but good enough... I make a very low offer, and if the realtor does not want to present it... I ask why, and tell them why my offer is low.

In a market like the Bay Area... it may be possible to find a rental for a lot less then it costs to buy ... leaving you the option to buy a good rental or two... in a different market where there may be more potential for slow growth and less potential for a BIG correction.

Just something to consider.... but there really is a certain financial advantage sometimes to rent vs buy... depending on your resources and whether you intend to stay there long enough to ride out any corrections that may occur. :)

M
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Re: SF Bay Area Housing: Listing agent underpricing

Post by Rainy »

We joined the bidding war at the Bay area 2 years ago. We made more than 10 offers in 2014, got overbid by 100k+ every time. Then, we got frustrated to play the game to find a "deal", so we made a sharp bid, bought a house early 2015. Our final price was about 150k higher than the close price of our first bid after 1 year, but for similar home. We did wish that we could do a sharp bid at the very beginning of the game.

Now, in 2016, our neighbour on the same street with 450sqft less than our home, sold for 50k more than our home. Well, at least we got one last year, it's much cheaper than this year.

In this crazy market, I can understand why people want to buy, because the housing price went up too quickly. And the housing price is currently strongly supported by the local income. I think early in the forum, someone posted that he got 200k annual income directly after college. For senior engineers, they got much more. Not everyone got those high income, but with limit house on sale, the choice of purchasing a house is not available for everyone either. For those tier-1 companies, in total they hire at least over 5000 new people a year. How many homes are sold in bay area every year? I believe definitely fewer than the number of high income people got hired. The bay area housing price will go down only when those company stops hiring.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by roymeo »

mspadorchard wrote: In a market like the Bay Area... it may be possible to find a rental for a lot less then it costs to buy ... leaving you the option to buy a good rental or two... in a different market where there may be more potential for slow growth and less potential for a BIG correction.

Just something to consider.... but there really is a certain financial advantage sometimes to rent vs buy... depending on your resources and whether you intend to stay there long enough to ride out any corrections that may occur. :)

M
Not sure where things are today, but I recall an article in the economist not about how the market was in the favor of owners back before the crash...though looking at this interactive chart, I don't see that the price-to-rent ratio ever being below NYC, etc.
http://www.economist.com/blogs/graphicd ... ly-chart-0

I wonder how much rent control affects those numbers--sure, if you were clever and got a place in 1985 with rent control and stayed there and haven't been chased out by predatory owners, you'd be sitting pretty.
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coldplay221
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Re: SF Bay Area Housing: Listing agent underpricing

Post by coldplay221 »

Rainy wrote:We joined the bidding war at the Bay area 2 years ago. We made more than 10 offers in 2014, got overbid by 100k+ every time. Then, we got frustrated to play the game to find a "deal", so we made a sharp bid, bought a house early 2015. Our final price was about 150k higher than the close price of our first bid after 1 year, but for similar home. We did wish that we could do a sharp bid at the very beginning of the game.

Now, in 2016, our neighbour on the same street with 450sqft less than our home, sold for 50k more than our home. Well, at least we got one last year, it's much cheaper than this year.

In this crazy market, I can understand why people want to buy, because the housing price went up too quickly. And the housing price is currently strongly supported by the local income. I think early in the forum, someone posted that he got 200k annual income directly after college. For senior engineers, they got much more. Not everyone got those high income, but with limit house on sale, the choice of purchasing a house is not available for everyone either. For those tier-1 companies, in total they hire at least over 5000 new people a year. How many homes are sold in bay area every year? I believe definitely fewer than the number of high income people got hired. The bay area housing price will go down only when those company stops hiring.
I agree in general. If a bubble is not broken then obviously the price of the asset a year later will be higher.
Employment at such numbers will not be supported when the revenue being generated by the companies are no longer growing at the same rate.
Afty
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Re: SF Bay Area Housing: Listing agent underpricing

Post by Afty »

I've always assumed that this underpricing is driven by real estate agents who want to sell as quickly as possible, while doing the least work.
hoops777
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Re: SF Bay Area Housing: Listing agent underpricing

Post by hoops777 »

Housing has become a joke.People take for granted they have to overpay,and there are always those willing and able to do it.Overpaying by vast amounts has just become a self fulfilling prophecy.You could have 20 people bid full asking and tell the seller pick one,but of course we have been brainwashed by the real estate community and too many people have too much money and no self control.It really,truly is ridiculous.Add the foreign buyers who are ruining our market and it is just sad.Step back and just look at it.Ridiculous.
Last edited by hoops777 on Sat Apr 02, 2016 12:21 am, edited 1 time in total.
K.I.S.S........so easy to say so difficult to do.
zakinsf
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Re: SF Bay Area Housing: Listing agent underpricing

Post by zakinsf »

coldplay221 wrote:

This isn't true - I've put in offers over the "Zestimate" and the Redfin "estimate" and still got trumped. This either indicates that the estimate cannot keep up with the comps or is just plain wrong.
I don't suggest relying on the Zestimate or Redfin estimate. Just download the raw data, analyze it, and make your own conclusions.

For example, Redfin has very rich, downloadable datasets (see the "Download All" link at the bottom of the search results). Download this data, filter it, and analyze it to come up with appropriate comps. You can't model irrationality but, in my limited experience (purchased one home in SF and one in the East Bay, with two of three offers accepted), this has worked well.
mchriton
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Re: SF Bay Area Housing: Listing agent underpricing

Post by mchriton »

Rainy wrote:How many homes are sold in bay area every year? I believe definitely fewer than the number of high income people got hired. The bay area housing price will go down only when those company stops hiring.
I agree.

Unless there is a recession, I think we have a ways to go before a peak. Lots of hiring. All the hiring managers I know are struggling to find qualified people to hire fast enough. Many of the hires at my mega corp are from out of state.

Low mortgage rates have even the insanely priced houses in the bay area affordable to many.

That said, I wouldn't buy now unless there is long time horizon.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by Gnirk »

Although I'm not familiar with the SF market, here's what's happening in Seattle. My daughter, is trying to buy a 1-bedroom condo, usually 30-40 years old, of about 700-800 sf:
Multiple cash offers, often $30,000 or more above the listing price.
Multiple conventional loan offers often $50,000 over the asking price.
Buyers are waiving the appraisal contingency, and paying the difference between their offer and the appraisal in cash to the seller.

By the way, rents for a 600 sf apartment, with off=street parking run about the same price as her total monthly payments for a condo including P,I,T,I and HOA dues!

It's so crazy that I wouldn't be able to afford to buy my first house on north Queen Anne hill that I bought in 1967. 2 stories, 1200 sf, built in 1908, 40 x 100 ft lot, 3 small bedrooms, 1 small bath, no garage. Paid $16,500 in 1967, sold it for $18,500 in 1972. The last sale a few years ago was for almost $800,000!!
boglesmind
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Re: SF Bay Area Housing: Listing agent underpricing

Post by boglesmind »

Shackleton wrote:
john94549 wrote:Back many years ago, when I was in Law School, I took a course. I think it was called "Contracts". Two basic concepts: "offer" and "acceptance". If you can establish both, "pow" you have a contract. Statutes of frauds aside, you don't even need something in writing. Getting to the issue at hand,

1. A written listing agreement is an "offer", open and obvious to the world at large. It states, in plain language, "I will sell this house to you if you offer me my listing price".

2. Should a person walk up the next day and accept the listing price, with no contingencies, "pow", as we say. Offer and acceptance. Since a contract for the sale of real property usually requires an instrument in writing to bind both seller and buyer (that pesky Statute of Frauds), let's assume the acceptance is in writing.

Explain to me, a retired lawyer, why "pow" goes "poof".

Pacta Sunt Servanda ("contracts shall be obeyed"). Just because it's Latin doesn't mean it's a bad idea.
Many years ago, I took "Contracts Law" and my understanding is the same as John94549's. It is the same as the little price sign on the shelf at any store. It says the price for the widget you want is $8.99. Now imagine that this is the last widget they have in stock, and you walk up to the cashier to purchase and they say, "No, the price is now $12.99". That is actually forbidden under our current FTC Pricing Guidelines. So why is it allowed in real estate?
Incorrect.

1. Because there was no offer for you to accept as the Professor in my contracts 101 used to say. Simple as that.

An agreement between a seller and a listing agent is a contract between them. Potential buyers are not a party to the contract. The listing agreement typically allows the house to be pulled from the market or from the agent (after some duration) and doesn't compel the seller to sell at any price.

2. The item advertised in a store shelf with a price tag is indeed an offer to sell.

3. The house listing price is an invitation to bid or "make an offer" at that suggested opening bid. Just like in auctions.

I am not a lawyer and I too took contracts 101 and many other law courses many years ago and still remember my very first class on contracts law because of the excellent professor who drummed into us the difference between "offers" whether written or oral, "invitations to bid",etc

I've "bid" or made offers and finally bought one. Having studied contracts law, I carefully read and understood one of the two standard offer letters / purchase agreements used in real estate transactions in NorCal before signing.

The "offer" to buy is a fairly lengthy legal document that lays out all T&C of the offer and covers laws/regulations governing real estate transactions. See for example,
http://menloathertonrealty.com/web/Unde ... ntract.pdf
or
http://www.car.org/3550/pdf/283726/3967 ... _Post).pdf

Boglesmind
john94549
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

Boglesmind, OK, I'm retired. Maybe contract law has changed since 2009 (when I retired). However, last I checked, a "written" listing agreement accepted by a "written" offer passed the Statute of Frauds smell test. The "Judge Judy" in me thinks just two words: "specific performance". The form in the link submitted, crafted by the Menlo-Atherton folks, posits, in quite plain language, that one offers, "in writing" to buy a certain property at a certain price. A "listing agreement", by contrast, offers to "sell" a certain property. Now, you can leave the price in the listing agreement blank, or say "make offer". But, if you put in a price, that's the price.

Now, if the Menlo-Atherton offering form matches "exactly" the listing form, no contingencies, no inspections, just "nada" as it were, why do we not have a deal? My mind races backwards to my Contracts class at Stanford Law in 1973.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by EddyB »

john94549 wrote:Boglesmind, OK, I'm retired. Maybe contract law has changed since 2009 (when I retired). However, last I checked, a "written" listing agreement accepted by a "written" offer passed the Statute of Frauds smell test. The "Judge Judy" in me thinks just two words: "specific performance". The form in the link submitted, crafted by the Menlo-Atherton folks, posits, in quite plain language, that one offers, "in writing" to buy a certain property at a certain price. A "listing agreement", by contrast, offers to "sell" a certain property. Now, you can leave the price in the listing agreement blank, or say "make offer". But, if you put in a price, that's the price.

Now, if the Menlo-Atherton offering form matches "exactly" the listing form, no contingencies, no inspections, just "nada" as it were, why do we not have a deal? My mind races backwards to my Contracts class at Stanford Law in 1973.
If you really need to work out the legal theory to explain and justify common, widespread, unchallenged behaviour, I suggest you consider the law of agency. The law of contracts is a step too late in the process.

I think when I have hired a real estate "agent," I have given that agent only limited authority (and I think the limit of the scope of that authority was apparent) to advertise my property and receive offers, with no authority to sell it. Whatever that limited agent does in pursuit of his or her commission, he or she has no authority to sell the property, so cannot make an enforceable contract for the sale of that property. Under your theory, I don't see why I can't just as well command a sale of your house by writing up my own flyer for it. I have just as much authority to sell it as your real estate agent.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

EddyB, last I checked, You (and you alone) sign a listing agreement. It's your offer, not your realtor's. The realtor does not own the property and has no right to sell it. The realtor also has no right to claim an "asking price".
Last edited by john94549 on Sat Apr 02, 2016 10:43 am, edited 1 time in total.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by jfn111 »

Afty wrote:I've always assumed that this underpricing is driven by real estate agents who want to sell as quickly as possible, while doing the least work.
You know what happens when you Assume.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

jfn111 wrote:
Afty wrote:I've always assumed that this underpricing is driven by real estate agents who want to sell as quickly as possible, while doing the least work.
You know what happens when you Assume.
I might disagree. It could also be driven by odd assumptions fueled by stranger people. But, then, I'm a retired lawyer, so what do I know? I do get the joke, however, assume = an ass out of you and me. One of the best "one liners" ever crafted.

Being retired, I was worried some might not have appreciated the "assume" joke.
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Re: SF Bay Area Housing: Listing agent underpricing

Post by jfn111 »

john94549 wrote:
jfn111 wrote:
Afty wrote:I've always assumed that this underpricing is driven by real estate agents who want to sell as quickly as possible, while doing the least work.
You know what happens when you Assume.
I might disagree. It could also be driven by odd assumptions fueled by stranger people. But, then, I'm a retired lawyer, so what do I know? I do get the joke, however, assume = an ass out of you and me. One of the best "one liners" ever crafted.

Being retired, I was worried some might not have appreciated the "assume" joke.
I figured you would get the joke. Some of the folks on here have axes to grind with a bad experience selling a house 40 years ago and refuse to let go. :oops:
boglesmind
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Re: SF Bay Area Housing: Listing agent underpricing

Post by boglesmind »

john94549 wrote:... A "listing agreement", by contrast, offers to "sell" a certain property. Now, you can leave the price in the listing agreement blank, or say "make offer". But, if you put in a price, that's the price.

Now, if the Menlo-Atherton offering form matches "exactly" the listing form, no contingencies, no inspections, just "nada" as it were, why do we not have a deal? My mind races backwards to my Contracts class at Stanford Law in 1973.
...

EddyB, last I checked, You (and you alone) sign a listing agreement. It's your offer, not your realtor's. The realtor does not own the property and has no right to sell it. The realtor also has no right to claim an "asking price".
A listing agreement is an agency contract between the agent and the owner of the property with very limited scope: The agent is to list/advertise/market the house, provide comparables, invite offers, quality potential buyers and help me choose and negotiate the offers made by the potential buyers. 1. The listing agreement to sell does not force the owner to sell the house. 2. The listing agreement does not involve a buyer. Not being a party to a contract, a buyer has no standing, let alone ask for specific performance - Even Judge Judy won't be foolish enough to order a specific performance in favor some one who is not a party to the contract and if she did, the show would be off the air in no time :-) or not :-) . 3. The listing agreement does not make an offer.

Let's use some common sense. Real estate sales transaction in the U.S.A, Europe, and Asia, whether commercial or residential , follow roughly the same procedure (details vary depending on local laws), namely: A seller hires an agent to list and market the property, the agent in consultation with the seller indicates initial asking price, under a listing agreement inviting buyers to bid on the property. Now buyers make offers and sellers can accept or reject offers and if accepted then we have a binding contract of purchase/sale. Until a buyer's offer is accepted, there is no contract and no specific performance. Don't you think there would be legion of buyers all over the U.S. and the world suing the owners for specific performance to sell their houses at the listed price if what you claim were true? Or, are all the buyers hoodwinked? Let us not forget that in substantial number of cases, the sellers are buyers of different property at the same time (due to retirement, downsizing, relocation, moving up, etc) and they know exactly what they are getting into (or at least they should :-))

Unlike products on a store shelf (which are identical -- a bottle of 12 oz XYZ shampoo is identical to thousand other such items), a house (even a cookie cutter house) is unique and needs price discovery and negotiation. Even brand new houses in brand new developments leave room for price negotiation due to its location within the sub-division, customization (if any) etc.

May I suggest reading some a) sample listing agreements and b) purchase contracts from any other state for that matter? In any case, no further posts from me on the sub-thread of listing agreements vs purchase contracts:-) Peace!
john94549
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

You realtors need some serious fact-checking. Point one: if you offer a property at price A, and it's accepted at said price, in writing, you have (as they said in Stanford Law school) a "deal". Even the Menlo-Atherton listing agreements are clear on this.

I had to chuckle. Presumably, real estate sales offers could state, in the listing box, "make offer". I did just that.
john94549
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Re: SF Bay Area Housing: Listing agent underpricing

Post by john94549 »

OK, I just took a nap. I woke up. Did basic contract law change?

Mind you, as I am retired, I can adjust to changing things. That said, "pacta sunt servanda."
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