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November 21, 2019

The Dangers of Overpricing in the San Mateo County Real Estate Market

While overpricing almost always has negative ramifications for sellers (lower sales prices than if priced correctly to begin with), it can provide opportunities for buyers who carefully track price reductions and react accordingly. Such buyers will typically face less competition from other buyers – often no competition, which eliminates any need for overbidding – and allows for more aggressive negotiation of the purchase price. Across Bay Area markets, price reduced properties consistently sell for lower average dollar per square foot values than homes that sell quickly.

The Truth about Home Pricing

Ironically, instead of getting more money… [Over-pricing] usually stigmatizes a property and reduces the eventual sale price to less than it would have been with more realistic pricing.”

House Selling for Dummies
Fair market value is that price a qualified, reasonably knowledgeable buyer is willing to pay, which a seller, not under duress, is willing to accept after the home has been properly exposed to the market.

Neither agents nor sellers determine market value: Only the market – willing and able buyers — determines market value. Agent and seller work together to create a plan – which includes pricing, preparation and marketing — to maximize the conditions that reliably achieve the highest possible sales price.

The vast majority of buyers will not make offers on homes they consider significantly overpriced. Either they don’t want to waste their time, or are uncomfortable with possibly “offending” the seller. In any case, they simply move on to other listings.

Well-priced homes create a sense of urgency in the buyer/broker communities to act quickly with strong, clean offers, and often lead to competitive bidding between buyers – which is the most likely way to increase sales price.

Overpricing wastes the optimum moment of buyer and broker attention: when it first comes on the market. This moment cannot be recaptured.

Overpriced homes kill any sense of buyer urgency and take much longer to sell, which then significantly reduces value in buyers’ minds: “There must be something wrong with it if it hasn’t sold by now.” It almost always eliminates the possibility of competitive bidding.

Overpricing helps sell competitive properties, since they stand out as good values in comparison.
If a listing has inadvertently been overpriced, the sooner it is recognized as such and the price reduced, the smaller the negative impact. Price reductions must be big enough to regain the attention of buyers and their agents – typically, at least 5%.

In order to win the listing, some agents suggest a list price considerably higher than what they believe market conditions and comparable sales justify—because they believe this is what the seller wants to hear. This is called “buying the listing” and is a violation of the fiduciary duty of honesty that an agent owes their client.

  • Price it right to begin with.
  • Prepare the home to show in its best possible light.
  • Implement the most comprehensive marketing plan possible.
  • Hire an agent who knows how to negotiate effectively on your behalf, and manage the
    disclosure and due diligence processes.

The difference can add up to tens or even hundreds of thousands of dollars.

Compass is a real estate broker licensed by the State of California, DRE 01527235. Equal Housing Opportunity. This report has been prepared solely for information purposes. The information herein is based on or derived from information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy or completeness of the information. Compass disclaims any and all liability relating to this report, including without limitation any express or implied representations or warranties for statements contained in, and omissions from, the report. Nothing contained herein is intended to be or should be read as any regulatory, legal, tax, accounting or other advice and Compass does not provide such advice. All opinions are subject to change without notice. Compass makes no representation regarding the accuracy of any statements regarding any references to the laws, statutes or regulations of any state are those of the author(s). Past performance is no guarantee of future results.

By Admin
February 3, 2015

Bay Area Real Estate Outlook 2017: 5 Key Takeaways

JBREC_post

Pacific Union teamed with noted Irvine, Calif.-based consulting firm John Burns Real Estate Consulting (JBREC) to deliver a first-of-its-kind, forward-looking report and presentation that offer a lens into the future of the Bay Area’s residential real estate market and economy.

In an exclusive, hour-long Nov. 5 presentation at the SFJAZZ Center in San Francisco, Pacific Union CEO Mark A. McLaughlin, JBREC CEO John Burns, and JBREC Senior Vice President Dean Wehrli  introduced the report and expanded on the factors that will shape the Bay Area and Tahoe/Truckee real estate landscape over the next three years.

Highlights from the forecast event include:

1.  We project the rate of annual price appreciation in most Bay Area regions to slow from its current rate of roughly 8 percent to 1 to 4 percent over the next three years. The level of continued investor activity will play a prominent role in price appreciation.

2.  The Bay Area’s housing market is currently the hottest in the United States, but prices are close to peaking.

3.  Job growth is outpacing population growth across the Bay Area — most notably in the San Francisco and San Jose regions – which is driving demand for real estate. Silicon Valley has one of the highest median incomes in the nation, and incomes are projected to continuing growing.

4.  The Bay Area and California have a very limited supply of new homes being built. In 2013, more homes were constructed in the Houston metropolitan area than in the entire state of California.

5.  Because of the home-price-to-income ratio, the number of residents who can afford to buy a home is much lower in the Bay Area than it is across the United States. Affordability in the Bay Area currently ranges from 23 percent in San Francisco to 43 percent in Sonoma County.

I encourage you to view the webcast of the event to get a complete picture of where our real estate markets are heading. We have produced a Mandarin-language version of the webcast.

January 12, 2015

How Much Do You Need To Earn to Afford A Home in the SF Bay Area?

 

2015 Blog Photo Money House Origami

 

Prospective homebuyers in the San Francisco region need to earn nearly three times as much as those in the rest of the country in order to afford a property, reflecting the rapid price appreciation our local markets have enjoyed over the past few years.

In a study, HSH.com crunched third-quarter numbers for 27 major U.S. metro areas and found that buyers in the San Francisco region need to earn a minimum of $145,361 per year to afford the $744,400 median-price home, the highest of any city included in the report. Nationwide, the average homebuyer could afford the median-price home on an annual salary of about $51,000.

While local buyers will certainly need at least one healthy income — or better yet, two — to afford a home, the study says that the San Francisco area actually saw the largest quarter-over-quarter decline in required salary, partially due to a 3 percent home price decrease in that same time period.

PRICE GAP BETWEEN NEW AND EXISTING HOMES GROWING

Sluggish construction activity is likely causing the price differential between to new and existing homes to widen, says a blog post from the National Association of Realtors.

In November, the median price for a newly constructed U.S. home was $280,900, 36 percent more than an existing home. NAR says that, historically, new homes have commanded 15 to 20 percent more than their older counterparts.

Part of the reason for the growing divide is the fact that construction activity is still 35 percent below normal levels. Although single-family housing starts have risen in four of the past five years and are projected to increase to 820,000 in 2015, NAR warns that the uptick may not be enough to keep home prices from rising further.

 

TOP 5 HOUSING MARKET THREATS TO WATCH FOR IN 2015

Although the U.S. housing recovery is projected to continue in 2015, there are some potential hazards that could throw it off track, according to a CNN Money article.

A drop-off in investor activity, both institutional and foreign, is a chief concern, although Chinese buyers remain quite active. Rising mortgage rates, which some economists say are guaranteed this year, are also a cause for concern, as is strict access to credit.

Finally, for the housing recovery to stay on track, incomes will at least need to keep pace with home prices, CNN Money says.

 

December 23, 2014

Beautiful song to get you in the holiday spirit now!

The Celtic Thunder’s version of Hallelujah is beautiful….worth your time to listen and get in to the holiday spirit.

http://faithtap.com/2085/celtic-thunder-hallelujah/

Celtic Thunder 2

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