It’s a crazy real estate market. There, I said it. How can you tell you ask? Allow me to elaborate. The first thing is that in many of the markets I work, there are fewer than 2 weeks inventory. This is especially acute in the sub $750,000 range. But even in the higher price points those number don’t go much above a month’s worth of inventory. That said, I am seeing more homes come on the market which is seasonally consistent with historical trends. It is the hot spring market after all. This is also the first week over week that inventory actually went up in 2021. Here in the Conejo Valley the number of available homes listed for sale went up 8% this week. But that means it went up by a whopping 14 homes across all price ranges. What’s this all mean you ask? It’s a seller’s market and it’s changing the way agents search property, sellers price property and buyers write offers on properties.
First, let’s start with agents. (Search homes here) In the past, I would set a parameter of price and area. This of course is unchanged. But then I would sort and start scrolling through in order of price. This is where I have changed. I now sort by days on market first and I start with zero days and stop at 3-5 or I may go out a week. There are a couple of reasons for this. First, this market is so hot that I want to get me emails out to my clients right away on anything new. Second, if it hasn’t sold in 5 days, there’s something wrong with it. Now I want to pause on this to let that sink in. Something wrong with it. OK, so I don’t really think there is anything wrong with it per se, but it’s likely mispriced for what it is. Funny thing about why a home doesn’t sell. If you find an objection with a home you just need to put the phrase “At that price” at the end of the objection. For example, the yard is too small… at that price. If it were $100K less would you say the same thing? Probably not. The condition is awful… at that price. I don’t like the location… at that price. See how that works? Now in this market, since it’s so hot, if a home has gotten an offer, there’s a reason and that reason goes away with “At that price.”
Regarding Sellers, the above is notable because when setting a price you have to ask, are you better off pricing it a little under and hope you get multiple buyers competing or a little higher to test the marketplace? If you choose the latter, that’s perfectly fine and in fact many times this is the exact course I recommend. Understanding this is one way where a great agent differentiates themselves from the masses. (Contact Tim here) But if you are a seller getting ready to price your home, you have to ask yourself this question: If I come in too high, how much am I going to have to reduce to get multiple parties interested enough to come and look or look a second time? If I were typing this on my phone I’d put the emoji with all the teeth showing because in California, at $10,000 or $20,000 price reduction don’t mean nuthin’! If you haven’t sold in 45 days, no one is racing to your door for a $10K cut, well that is if you’re over $500,000 asking anyways… Not only that, go back and reread how agents are sorting listings. Again, this is a crazy market, but a seller can still blow it.
As for buyers, you guys know how brutal it is out there. My buyer just lost out on an offer in the Rancho Park area of West Los Angeles. And yes, I do work the City incase you were asking… Anyway, the charming 1927 Spanish Bungalow was expanded to 1,700 square feet, had a Wolf range and the carriage house (garage – but only wide enough and long enough for a Model T or horse and buggy) which in this case was finished with high tongue and groove ceilings and HVAC, was listed for $1,595,000. We were one of 110 showings and 40 offers. We offered $1.7M, $105K over ask. The sellers actually only countered the top 9 of which 5 were all cash. The counter by the way, also demanded a 15 day close and no, repeat no contingencies. Not loan, appraisal or most importantly, as is – no investigation contingency. In other words, once your earnest money is in escrow, it’s subject to forfeiture. Nuts, right? So, what does that mean if you’re a buyer? The answer is if you see a home and really like it, don’t get hung up on the asking price. It is not the same thing as the selling price. Asking if designed to get multiple offers, will get multiple offers and the price will go higher. Therefore, you need to look at any home in the context of other similar, alternative homes you could buy at the same time and if there aren’t any, or you’ve lost out on some already, you have to step up and give it your best shot. My counsel to my Westside buyers was that I thought the home was going to go for $1.8 (it’s actually is in escrow for closer to $1.9 BTW) and that whatever their upper, upper limit was for that property – and it was an amazing never-move kind of property and location – go in with that. So buyers, do not assume you will get a counter if there are multiples in play. Sellers who receive a lot of offers, while excited, are exhausted too. They want the process over just as bad as all the buyers. This means they’ll pick the smallest number to counter they think they can to get the best price and terms. Sorry for the tough love but that’s how it is right now and for the foreseeable future.
Oh, what about appraisals you ask? Simply put, it’s a problem so you need to be prepared that you might have to come up with additional cash. I will say this about appraisal, first they are backwards looking so in every appreciating market since the dawn of time (Think caveman here: Baku: “Grog. I give you 5 brontosaurs femurs and a wooly mammoth tusk for your cave.” Grog: “What? Baku, you a crazy man. That last year price. Cave worth 2X that today! This a hot market!”) (See Tim’s latest cave listing here) Yesterday’s closed sales data doesn’t support today’s rapidly rising home values. But also, the appraisal isn’t telling you what the home is worth. Value according the National Association of Realtors is defined as follows: “A home is worth what a willing buyer and willing seller agree on without the presence of duress.” You offered, they agreed, that is now market value by definition. In fact, even though you’re paying for the appraisal, it’s not for your benefit at all. The appraisal is for the bank’s benefit so that when they go to sell the loan, they can substantiate the loan to value ratio with an accompanying appraisal. Don’t get hung up on what one appraiser says, especially when if it does come in low, you’ll want to say to the guy or gal appraiser, “Oh yeah? Find me one for that and I’ll buy it!”
If you like what you read here, please reach out and let me help you sell YOUR cave for top dollar.