Yesterday, YELP sent me an email advertising the "10 best donut shops in San Francisco." That's all fine and dandy, but as I live in the East Bay, the only stop I make for these delicious treats is Colonial Donuts in Montclair or on Lakeshore Blvd. It's a guilty and fattening pleasure to be sure (no judgement), but it's also a nostalgic one for me as well.
Growing up in Sacramento, our house was just a short walk to Marie's Donuts on Freeport Blvd. "Home of the 6-cent Donut!" their signs proudly proclaimed and as my father could never resist a good bargain, he would often hand us a crisp dollar bill on Sunday mornings and Jill and I would race to the stand for a dozen mouth-watering glazed donuts and dutifully bring back 28 cents in change. (Maple bars were 15 cents and if you wanted to splurge on one of those, you had to spend your own dimes. Harry counted the change.) The trick was trying not to open the sweet-smelling bag before we got home.
Sadly, those days are long gone, but I still think a warm donut is a bargain by most standards. I also appreciate the fact that when I buy a donut, the price is the price. It's not going to waver. I'm not showing up on Tuesday and paying $1.50, and then returning on Wednesday and discovering the price is now $3. The sales person isn't asking "What do you think this donut should go for?" Or better yet, "This one's trendy and made with lavender; how much are you willing to pay for it?" (As an aside, gourmet donuts made with herbs are an abomination and completely miss the point.)
Unlike a donut, real estate is HIGHLY negotiable and as such, figuring out the appropriate value can be a surprisingly difficult task, and is, more often than not, a moving target . . . especially now.
Because for years it's been a Sellers' Market, so over time, Realtors adopted a pricing strategy designed to lure in Buyers and create a multiple-bidding scenario that drove values ever higher. That construct didn't necessarily thrill Buyers, but it usually delivered an excellent result for Sellers and made Agents look like magicians. (Abracadabra!) Consequently, almost every Bay Area Listing Agent used this highly successful strategy and smart Buyers quickly learned that they were likely going to bid 25-30% ABOVE the list price if they hoped to be in contention. Everyone knew the rules and we were all playing the same game. At least it was consistent, if not always crystal clear.
Cut to: Covid-19, a world-wide pandemic, Shelter-in-Place, social distancing, and the cancellation of all public opens, and you've got a new landscape in which to conduct business. Consequently, Sellers (and their Agents) can no longer uniformly count on multiple offers. As a result, many of us have begun setting prices meant to be far more "transparent." In other words, the listing price is a price the Sellers have agreed to accept if presented with a qualified offer. (Fair enough.)
Isn't that a breath of fresh air? (Why yes, it is.)
However, because demand is still outpacing supply by a fair margin, many Agents are sticking with "strategic pricing," meaning the price absolutely does NOT reflect what a Seller is willing to take. These below-market listing prices are meant to create a feeding frenzy - and often do - although not always. Put another way, artificially-manipulated offer prices are the floor, not the ceiling. When that strategy works, it's fantastic. When it doesn't, it's fairly painful.
The problem is that the pricing paradigm has now become highly inconsistent, making it difficult to know which of the two lanes the listing price truly reflects. Add in a third category, which is the "overpriced listing," meant to be negotiated DOWN from the list price, and you can see how puzzling it can all become - especially to the novice home buyer. Even those of us who are extremely experienced and have been selling Real Estate in all kinds of markets (up, down, and sideways) are struggling to deal with the confusion.
Moreover, in spite of unprecedented and unsettling conditions (worldwide!) setting the stage for a contracting marketplace, housing prices are actually going UP in many places. (Not all places mind you; all communities are NOT created equal.) With the need for our homes to provide more utility and space, coupled with historically low, LOW interest rates, Buyers aren't waiting to see if the market corrects come the fall; they're buying NOW and they are buying en masse. In other words, what use to be a 12-14 day turnaround has shrunk to 4-7 days in many instances. In some cases, the properties are sold before they ever come to market. And just like that, faster than you can fry a donut, houses are going, going, gone!
In short, aligning yourself with an Agent that knows the marketplace is going to be more important than ever. You'll want one that works locally, one that can provide market context, one who has long-standing relationships with other Agents, one who is willing to educate and debate your viewpoint when necessary, one who listens, and one that knows the difference between pricing "strategically," or pricing "transparently." Because when it comes to Real Estate - there's pricing well, priced to tell, priced to sell, and pricing hell!
And because I love a good pun, if you don't understand how the "dough," is being kneaded, it's gonna make you "nuts." (See how I did that?)
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Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.