Ah, spring! The gardens here in the east bay are looking so gorgeous, and the air is smelling so sweet with the fragrance of iris, roses and the late-blooming wisteria. Is it any surprise that so many people want to move here?!

gertude.roseFor the sellers the early spring market has also been gorgeous. On average, sellers in the area received more than 6% above their list prices; Berkeley homes closed more than 15% over list. So I am very proud that on both the buyer and seller side, my clients beat the averages! I had buyers who just closed on a wonderful view home above the UC Campus for less than 11% over list in competiton, and a set of Oakland buyers are currently in contract below list price. On the seller side, I must say I am still grinning from the result of my recent listing on Edith. I knew getting it to market quickly was crucial, and I judged correctly that updating the kitchen and giving the property a fresh look would pay big dividends. But even I would not have predicted such an exuberant response: 10 offers, four of them over $800K, and three of them were without any contingencies. The final result was a sale at 30% over lis t price, and a very high price for a property that shows as a 2/1 in public records. Would I have encouraged buyers to write an offer that high? I think I won’t answer that question, and will just keep grinning on behalf of my sellers!

After feeling like Queen for a Day, reviewing those 10 lovely offers, it was back to looking at homes through the eyes of my buyers. The market looks different through their eyes for sure! While we are seeing a bit more inventory in the past couple of weeks, the quantity of available homes is still very low. We thought our inventory was low last year, and this past month we had 18% fewer homes on the market than this time a year ago, making this an extremely difficult market for our buyers. And we seem to have a real dearth of options right around the median prices of all of our East Bay cities.  For example, in Berkeley, with a median sales price of $835K, last month there were just 17 Berkeley properties selling within $100K on either side of the median. Right around the median homes were selling 20-22% over list, with $/sq. ft. numbers in the high $500-high $700 range.

Last year at this time buyers were frustrated by the standard of overbidding: it seemed that they routinely needed to offer $100K over almost any list price to succeed. Now in 2014 that amount has jumped to $200K if buyers wish to have a fighting chance, at least on the most desirable properties in the most coveted areas where homes are listed close to $1M: North Berkeley, Rockridge, and now often Kensington as well. I just helped one of my colleagues review offers on a Rockridge listing, and in that case the winning offer was more than $250K and more than 30% over list. And in this case too, the successful offer was without any contingencies. That continues to be a common occurrence.

March Madness for 2014 brought us further changes from last year: we saw more pre-emptive offers. That means that buyers are wanting to jump the queue and offer either before the house is ready for market, or before the sellers have announced they will hear offers. Usually the buyer who does that needs to be willing to pay a considerable premium to succeed. A recent example involved a home in North Berkeley that failed to sell two years ago at $1.25M. Marketed at $1.495M this year, it frankly seemed priced high. However, after just one of the two planned Sunday opens, the sellers received three offers, and is reported to be in contract at $2.1M. But appraissal issues are hitting some of these examples of high over-bidding. Without an appraisal contingency, buyers may be faced with making up the difference between the appraised value and their offer with cash reserves.

We’re continuing to see a great deal of cash, but not so much around the medians for each city. I’ve been seeing all-cash offers for lower priced properties, especially condo sales. And we often see all-cash offers in the higher end. Now that it’s possible to refinance fairly quickly after a closed sale, many of those purchases may soon actually involve financing.

Another new record from our March Madness: the first *overbids* that exceeded $1 million! We knew that had happened in San Francisco starting last year, but not here in the East Bay. Last month there were two examples that created quite a buzz. One was a property in Piedmont that sold just over $4M, starting at a list price just under $3M. More striking was a home in the Claremont neighborhood, a large brownshingle property that went 67% over list, and $1,150,000 over list! Those properties both sold in the $900-$1,000/per sq. foot range.

But remember, these are the news-worthy stories. There are still homes selling at, and below, list. Those tend to be the less well-presented homes, ones that begin at too-high prices, or ones with one outstanding flaw. But the ugly ducklings may represent a good value. I always encourage my buyers to consider the ones that the crowds passed over.

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I’ve just been in the enviable position of representing sellers on a popular listing. We’re at the very satisfying finale: receiving multiple offers. I had two extremely busy open houses, and more than three dozen agents asked for the disclosures. By the end of the day we received 10 offers, all over list price. The top four offers were between 25-30% over list price, and the top three were non-contingent.

Edith.kitch.before

Edith kitchen before update

Edith.kitch.after

Edith kitchen after update

Fortunately the sellers in this case had the resources, and wisely followed my advice to invest in updating the home before bringing it to market. During these past two years of a very active market my mantra has been this: whoever updates the kitchen will get the highest return on their investment. This home is a perfect example: we kept the cabinets–just painted them and added new hardware. We replaced the counter tops with quartz, put in a new sink, faucet and dishwasher. Swapping out an old electric stove was crucial: there’s now a gas line and new gas stove, plus a new vent hood. The floor and lighting are new as well. There were lots of good features of this home besides the important one of location. But kitchens really do capture the imagination for how people will live in a space, cook daily meals, entertain their friends. And kitchens really do sell so many homes! I could hear it in buyers’ voices as they entered the kitchen and said “ahhh!”

In this market I wish I had a dozen listings like this: a home that is well-located near amenities and transportation on a quiet street. But if I and other agents had lots of listings, it would not be the same crazy market! What continues to drive the wild over-bidding is the dearth of attractive listings. The average amount of over-bidding in Berkeley last month was 10.5%, 2.5% in Oakland. But those averages contains some extremes, and my guess is that the March figures will be considerably higher. Within the past two weeks especially we have seen some truly astonishing sales prices that were beyond the list prices by 50-65%, and in some cases by hundreds of thousands of dollars.

So what are buyers to do if they wish to succeed in this market? My strongest advice is to really take stock of your financial ability, and try to come to terms with the amount of risk you are willing to accept. Right now the power is mostly in the hands of the sellers. Each contingency that you include in your offer represents protection for you, and risk for the seller. A great many of the successful offers right now in competition (and it seems that all of the homes my clients want receive multiple offers) are non-contingent offers. Especially if the buyers need to obtain a loan, they need to be willing to do as much in advance as possible to have their file reviewed and approved, so that their offer does not contain a loan contingency. In a rapidly moving market such as this, appraisal is rarely an issue. So inspection contingencies become the question for many. Each home is different, with different physical conditions, different amounts of updating done or required, and with varying amounts of documentation available from the sellers. As much as I hate to recommend it, buyers may need to be willing to accept reports provided by the sellers if they are going to have a chance at having their offer accepted on the house that they love, and wish to have as their new home. It does seem so unfair that buyers must accept what can seem like a high degree of risk. But that is what this market is demanding. List prices are the opening bid in a silent auction. They are not derived in any scientific way, but more they are a starting point that seems reasonable at the time to the agent or the seller, based largely on other list prices from the recent past. So I urge buyers not to get too fixated on the list price. Try to determine the price that seems so high that you would you be happy to let someone else be the winning bidder on the house that you very much want—and then offer a bit less.

I certainly wish this market were not so hard on buyers. And I also wish that we could price our listings closer to market value, and avoid the multiple offers and multiple heartaches of the current system. That is not likely to happen any time soon. As long as our seriously-local market continues to experience high demand and low inventory, buyers will need to give their highest and best offer right from the beginning, and assume some degree of risk. I urge buyers to really understand your budget, know your motivation and your risk tolerance—and then follow your passion to make a particular house your home.

 

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Looking forward to an Early Spring East Bay Market

January 18, 2014

As we enjoy the guilty pleasures of a warm, extremely dry January, besides asking if it will ever rain again, I’m making my guesses about what the East Bay real estate market will bring in this new year. Usually January is a decidedly slow month. In the past I’ve told clients that the spring market will begin when […]

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Hot East Bay Market in the Midst of Cold Weather

December 11, 2013

As the weather turned cold our East Bay market heated up further as inventory shrunk. Lower inventory is normal given the season. What’s unusual is that buyer demand has increased, if anything, over the past couple of months. Right after Labor Day we saw a small deluge of listings, especially in the hills where I recently […]

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Keeping Out the Winter Cold

December 11, 2013

These past few days saw me wearing my down coat and gloves, and being very pleased to have heated seats in my car. How is the temperature in your home? If your PG&E bill just shot up like our real estate market, I encourage you to check out a cool FREE online tool for those of […]

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East Bay Real Estate Market Update: The Scary Story for October 2013

October 15, 2013

October brings thoughts of “ghoulies and ghosties, and long-leggedy beasties, and things that go bump in the night.” Real estate has its own array of creatures and crawlies. Some buyers are still frozen in enchantment by alluring spells: Waiting for lower interest rates: that spell was broken 6 months ago Prices will come down again: that […]

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Fall Events: Great Resources for Period Enthusiasts

September 26, 2013

Several Fall events provide great opportunities for owners of vintage homes, or for anyone who likes period details, to explore resources. BAHA’s Fall Lecture Series: Living with Arts & Crafts. A three-part series will be held at the Hillside Club, 2286 Cedar Street, Berkeley. Thursday,  September 26, at 7:30 pm: The Tiles of California Faience, Berkeley, Cal., 1913–1959 […]

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A Shift with the Season: Autumn Brings More Inventory to the East Bay

September 18, 2013

What a difference these past few weeks  have made! Summer changed to Autumn: there’s a discernible difference in the light and a crispness emerged in the air. And then there are the spiders–now it is indeed spider season! In real estate, especially in the Berkeley hills where I’ve been spending a great deal of time with […]

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Architectural Lust for August 2013

August 24, 2013

Two North Berkeley homes provide visitors the chance to see some amazing details in wood and tile. Both are open tomorrow, August 25th, from 2-4:30 pm. The first is a home that will require a major restoration—and for the right person it will be a very rewarding project. Located on a wonderful block of Arch […]

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The August 2013 East Bay Market update: a Mixed Picture

August 10, 2013

This past month has been a very mixed picture: continued wild over-bidding alongside examples of good properties receiving no offers. A colleague had no offers on the scheduled date, and then received three the next week. The buzz this past week was a Claremont home with gorgeous views of the canyon: 15 offers, and the […]

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