Bossed Around by the MarketJanuary 22, 2009
We’ve written about it before, and this little story is a good example. The wisdom? Listing prices mean nothing. The reason they mean nothing is because sellers have a million and one reasons why they list their properties at certain prices. Maybe their asking price is indicative of how much they owe on their home, their credit cards, cars, how much they need to pay their agent, closing costs, plus a little cushion. Maybe its based upon how much profit they want to turn since they made some improvements. Maybe they’ve got medical bills to pay off. Who knows? Like I said, there’s a million and one reasons.
Rarely do you find a home that is priced right on the money. And oftentimes you’ll see homes intentionally underpriced by $100K or more, just to create a buzz and have the market bid it up.
In any case, here’s a story about a cute home close to the Palace of Fine Arts. 3271 Baker was purchased in November 2006 for $1,700,000, just a smidge above the asking price of $1,695,000. It had only been on the market for 37 days. The buyer clearly made some nice improvements during their ownership. New kitchen, new bath, and really cleaned up the property.
Less than two years later, 3271 Baker came back on the market. It was listed on July 3, 2008 with one of San Francisco’s best and most respected agents. The list price was
$3,395,000. Three weeks later the price was dropped to $2,998,000. After 2 and a half months at that price, it was withdrawn.
Fast forward to the end of September 2008. The property came on the market again, this time with another agent. The list price was $2,798,000. After 10 days on market, the price shot up $2,998,000. Why up? Our guess is that the seller perceived $2,798,000 as a very low price that would create buzz and that there would be some offers. But after 10 days and no action, the price went up to where they were willing to sell for. Fifteen days after the price increase, the property was withdrawn. Adios to that strategy.
Fast forward two and a half months to January 9, 2009. The home came back on the market with an asking price of $2,595,000. Just 12 days later (yesterday), the price was dropped to $2,475,000.
Phew. Okay, that’s the history behind 3271 Baker. All in all, it’s been on the market a combined 109 days beginning on July 3, 2008.
And the reason for this story? Actually, there’s a bit of wisdom tucked all throughout:
- Listing prices mean nothing. Sellers have many motivations behind that number.
- Own your home for more than 2 years! Preferably 5-10 years.
- The market is self-correcting. You can ask whatever you want for your home, but that doesn’t mean you’ll get it. The market is the boss, not the seller, not the buyer, but both coming together and acting willfully.
- A home with lots of price drops can lead buyers to believe that something could be wrong with it, even if it’s in perfect shape. Knowing this, would you want to risk overpricing your home?
- Contrary to popular belief, when a price reduction hits, it does not mean the market is “coming down”. The market comes down when an owner loses money on their investment instead of makes money. Lots of owners selling at a loss = market coming down. Lots of owners selling at a gain = market going up. Listing prices have nothing to do with it.
Posted in Appraisal 101, Home Buying, Home Selling, Marina, Neighborhood Info, Public Listings, Tips | Tagged 3271 baker, list prices, Marina, market, palace of fine arts, san francisco, san francisco real estate, single family home |