Heads up, home buyers: Super-underpriced homes are popping up in the market again. It’s a good time for a refresher on how this particular list price strategy works, so you don’t waste time on homes you can’t afford.
The coronavirus and ensuing shelter in place (SIP) temporarily influenced list prices in San Francisco, with many sellers and their agents going with transparent, closer-to-value asking prices. The idea was to limit property access to qualified buyers who could purchase the home at market value.
But I’m seeing more instances of super-underpriced homes hitting the market lately, particularly in neighborhoods like Noe Valley or Glen Park, and specifically with small single-family homes that could use a gut renovation. For example, a three-bedroom home on Chenery listed for $1,195,000 at the end of April closed last week for $1,628,000.
The latest entrant in the game is 606 Diamond, a 1,050-square foot two-bedroom Victorian that came on the market a few days ago for $1,128,000 (photo courtesy of Park North Real Estate.) The home has expansion potential and it’s likely that there will be plenty of buyers interested in using the home in its existing condition for a while before remodeling the kitchen and bath.
But before you get your hopes up and move ahead with an offer, first consider the area’s average sale price over the past six months or so. In 606 Diamond’s case, that average price is roughly $1.7M. Yes, there have been houses over the past year that have sold for less than $1.7M. But they were cottages, total teardowns, tenant occupied or situated in inferior locations.
606 Diamond has two stories over a garage, nice Victorian curb appeal, a yard and a great Noe location near 24th Street. These types of homes seem to appeal to what we call “end users”—deep-pocketed buyers willing to spend up to $2M to land a property that they can transform into their dream home.
And single-family homes in Noe are not anywhere near $1,128,000. ($1.1M was the average Noe sale price back in 2004.)
Finally, a good rule of thumb in San Francisco is that if a house price looks too good to be true, it probably is.