On any given Sunday, we’ll be at one of our open houses and a visitor will ask us to explain the logic behind the artificially low list price on our listings (and all East Bay listings). It’s a 100% guarantee that we’ll have this conversation at least once a week.
For buyers, the gap between list price and sales price can be baffling and frustrating. If you can buy a gallon of milk for the listed price, and if the gas in your car is at a transparent and set price, why are housing prices such a mystery?
And sellers can be equally as confused…how does the low list price advantage them?
The truth is that the “list-low, sell-high” model has been around for a long time - at least 20 years. It’s a framework that is rather set in stone and rather than buck the trend, we want to shed some light on that ever-present question…”why list so low?”
The most successful sellers understand that one of the most important, strategic decisions for any home sale is the list price.
We recognize that our market has a listing strategy and cadence different from just about every other market in the country. The majority of East Bay listings market a “teaser” price as the list price, with a set offer date on which the seller will review offers.
This listing strategy is intended to attract a wave of attention, multiple offers, and a competitive negotiation – all to drive the highest price the market can bear with the most competitive terms. It’s important to “divorce” the concept that the list price is a reflection of the value of the house in your mind…the list price is a marketing tactic. The actual value of the home is a number determined by the “winning” buyer - that buyer sets the market value the moment they close on their new home.
During the home buying/home selling process, buyers are invited to visit the home and conduct their own inspections and investigations to satisfy their questions…and all the while hold their offers. This market chooses to set a designated offer date and most sellers won’t review any offers that come in before that date. On the offer day, buyers step forth with their “highest and best” offers - after having spent time visiting the home and thinking hard about what highest-and-best means to them. With blind bidding, buyers are tasked with finding and offering their highest price. As competition for a home grows, buyers grow their budget in turn.
It is evident in the data that a home that goes into contract on or before their offer date procures a higher sales price compared to those that linger past. If we look at the homes that have closed escrow this year, those homes that sold by their offer date had an average sales price 31% higher, compared to homes during the same time that sold beyond their original offer date. When we are talking about $1m+ sales prices, that difference equals hundreds-of-thousands of dollars more. That is a big difference!
As the market shifts and sways, knowing where to list a home is the difference between multiple offers (and negotiating leverage), and no offers. Leverage is everything when it comes to selling your home for the highest possible price.
To complicate matters for our buyers, each listing agent can have a reputation for listing far below the anticipated sales price, or closer to what they think the outcome will be on close of escrow…it’s important to lean on your agent for that intel so that you aren’t misinformed by an impersonal online estimate.
We know how to read the tea leaves for our buyers, and we know how to set the list price for our sellers. We also know that we’ll have this conversation next Sunday, and the Sunday after, and the Sunday after that…and that’s ok!
