The San Francisco market has really kicked into high gear over the past three months. Buyers are coming out of the woodwork, and to be honest, they’re creating a sense of desperation from which sellers are seriously benefiting. A variety of factors that you’ve undoubtedly read about in the media is contributing to this sudden real estate boom—tech job sector growth, astronomical rents, the Facebook IPO, rising consumer confidence. You name it, it’s fueling buyer willingness to lean more on emotions (and fear) and “write high.”
One recent example is 33 Henry (above), a modest 2BR/1BA first-floor condo with less than 1,000 square feet and tandem parking on a nice block in Duboce Triangle that was listed for $699,000 about a week ago. 25 offers later, the unit is reportedly in contract for above $800,000.
33 Henry is far from an extreme example of the current market, however. You’ve probably read about 3928 20th Street, the 3BR/1BA Edwardian listed at $849,000 which sold in May for $1.4M in an all-cash transaction. And I’m sure you may be aware of the purple Victorian at 1164 Church that needed work and was listed for $849,000. It sold for all cash at $1.2M. And let’s not forget 1076 Dolores, a 3BR/3.5BA condo with a deeded carriage house that needed a facelift, listed for $1,100,000. It sold for $1,505,000. Though I’m focusing on the Noe Valley/Mission Dolores area with these sales, many similar outcomes have transpired on properties in all areas of the city.
Of course, the “list low” strategy is an old one, and it does its job routinely by attracting the attention of a wide range of buyers who are drawn in by the possibility that they may be able to afford a particular property. Part of handling this reality is to know market values in various neighborhoods, so when you see a large Victorian fixer in the Mission listed at $550,000, you don’t get your hopes up that your budget of less than $750,000 will prevail.
But when the listing agent and sellers sit down to set a list price, the strategy in most cases is not to list the property hundreds of thousands of dollars lower than current market value. However, a feeding frenzy can transpire around a popular property in a highly desirable location, and one or more buyers may pay well above comp range just to wrap up their house hunt. After all, it’s no fun spending months seeing properties, reviewing disclosure packages and writing offers, especially when you have a baby on the way or are eager to stop paying your landlord $4500 a month for your apartment. And who knows when the next home will come along that you’ll like as much?
In the end, things get a lot more manageable when buyers and sellers stay rational, keep their heads and do business. I know it’s frustrating “competing” for properties. One good way to get around that is to expand your search and hit up the less-obvious neighborhoods and property types. The key is finding the space you need in a workable location. And you should be able to do that without paying half a million over the list price.