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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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 the daffodils bloom (many male agents say after the Super Bowl…similar timing!) And with this warm weather, those daffodils are getting ready to bloom early!

daffodil-flowers-photo-daffodil-flower-wallpaperAlready this month I have put a set of buyers into contract, have taken my first listing, have two buyers in contract from December that should be closing soon, and I’m already meeting with  buyers who want to start their searches. I’m hearing from several colleagues that they are having a similarly, and uncharacteristically, early and active start to 2014.

So what do I expect for this year?

  • Our market will be active sooner than normal this year–unless a deluge finally arrives!
  • After a year of very low inventory in 2013, I do expect that more sellers will have decided it is time to bring their properties on the market, meaning a very active spring.
  • The increases in median price last year were remarkable, and I will guess not sustainable. With several cities seeing price increases last year of more than 30%, a slowdown is inevitable. But pundits are still predicting increases in the 5-10% range, with the cities hit hardest in the downturn seeing the higher increases.
  • Interest rates will rise. Now in the mid-to high-4′s, most anticipate increases that will take them to the low-to mid-5′s by year end. Both factors continue to decrease affordability.
  • The exuberance of the technology activity in Silicon Valley will continue to drive demand up to San Francisco, and there will be a continued trickle-over effect to us in the East Bay, where our prices are still relatively affordable.
  • I do not see the burst of any local bubble in 2014. There’s lots of talk at the national level about whether the housing sector right now is overheated. In our East Bay market I see continued demand for inventory that cannot be dramatically increased with new housing stock.

Let’s check back later this spring and see how accurate my crystal ball has been!

With warmest wishes for a happy beginning to your 2014.

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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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Rising Interest Rates: a Lesson in Perspective

July 16, 2013

Buyers purchasing at today’s rates are facing quite an adjustment if they’d been pre-approved before mid-May. From the beginning of May until now rates have risen a full point, with a significant impact on affordability. The rapidity of the rise was indeed shocking. And of course many buyers are wishing they’d acted sooner. But it’s […]

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