The technique is to create one thing of a blind public sale the place consumers attempt to puzzle out a quantity that the sellers’ will really settle for and a quantity that’s increased than all the opposite gives. It’s an area quirk that everybody appears to acknowledge is simply the way in which that issues are executed right here.
Jodi Nishimura, a Compass agent based mostly in Oakland, stated she was stunned when she moved to the realm from New York in 2002 and noticed how listings have been priced decrease than their price, normally round 10 p.c much less at the moment. “It wasn’t common to see homes go for 50 percent over the listing,” she stated. The Covid housing growth has made issues worse, she stated, with sure houses — significantly ones with nice outside house — promoting for large premiums, effectively above their listed costs.
Buyers are likely to detest the underpricing — describing it as all the pieces from “a sick game” to “bizarre.” But brokers say it really works effectively for sellers. “Sellers want to keep the bidding war blind,” stated Mr. Stea, who had the Rockridge home that offered for greater than $1 million over asking. “But it disfavors buyers because they’re shooting in the dark.”
D.J. Grubb, president of the Grubb Company, an area brokerage, additionally attributed the intense discrepancy between record costs and sale costs to a fast-moving market the place residence values have climbed shortly, making it tough to precisely work out the worth of houses.
Agents within the space use a basic “merchandising strategy,” however take it to an excessive, says Mr. Grubb. Instead of utilizing the retail trick of pricing a $1 million product at $999,000, brokers within the space usually advise sellers to cost a $1 million residence to seize consumers buying within the $750,000 value vary, which suggests an inventory value of $749,000. That approach, a number of gives will are available with the profitable bid usually round $1 million. If sufficient gives are available, one would possibly are available at $1.2 million — possibly from somebody prepared to pay a premium to place an finish their exhausting housing search, or somebody who assumes residence values will quickly rise to fulfill what they’ve paid.
When Katy Anderson purchased her Upper Rockridge residence about 10 years in the past, she and her husband transformed it from prime to backside, together with eradicating a swimming pool to create a big, flat garden her kids used as a soccer subject. Ms. Anderson stated they have been able to “cash out” and purchase a fixer higher in Orinda, a close-by suburb, and pocket a few of the fairness as a monetary cushion.
Ms. Anderson, who can be an actual property agent with Compass, paid $786,000 for the house a decade in the past and spent about $500,000 on the transform. She thought they may have the ability to get above $2 million for the 3,000-square-foot residence — then she noticed a neighboring residence promote for $2.6 million.