
$782k over asking for a house in Sunnyvale - cx1000
http://www.mercurynews.com/2017/09/12/now-this-is-ridiculous-782000-over-asking-for-a-house-in-sunnyvale/
======
victorNicollet
In France, there's no such thing as paying over the ask price. You are forced
to sell to the first buyer who offers to pay the ask price. I suspect that
this is done to prevent prices from rising too quickly.

~~~
JustAnotherPat
Can you just overprice it and let bidders fight on lower than asking?
Essentially the same thing, but with different psychology. I wonder how it
would play out differently.

~~~
Svip
If France is anything like Denmark, the price is usually based on a
combination of a public and a private valuation of the house (both of which
are available to buyers upon request). You can give it any price you want, but
since buyers can get an insight to its valuation, the asking price is usually
around its valuation.

So as I understand it, the strategy is usually to sell the house for a much
higher price than its valuation, hoping someone is really interested in the
house. And as time passes, you keep lowering the price until you get a buyer.

~~~
pkulak
If buyers and sellers never set a price, how is a valuation ever accurate?

~~~
victorNicollet
Usually, you try to base it on the recent sales of similar properties nearby.
Sale data is more-or-less public information, and there are good aggregators:

[https://www.meilleursagents.com/prix-
immobilier/paris-75000/](https://www.meilleursagents.com/prix-
immobilier/paris-75000/)

~~~
_dps
I'm curious if the population generally thinks this is a reasonable situation.
I can easily imagine a 25% difference in valuation of two properties in the
same area with the same number of bedrooms, the same age, same space, and
nominally the same amenities. I can also imagine a 25% difference based on
some newly opened restaurants, new bus routes, etc., that will not be
reflected in historical data.

There is also an enormous subjective-experience component in how people value
residential real estate, and enormous variation in details that really do
matter and aren't available in real estate data aggregates (like lighting
profile, and how intelligently the interior design exploits that lighting
profile).

It's so far from what I'd consider reasonable based on my (obviously limited)
experience, and I'm genuinely curious how the locals feel about it.

~~~
victorNicollet
Paris is its own bubble, with prices that are less tied to changing things
like new bus routes or restaurants, and more to the perception of what other
people pay for it. The historical aggregates usually serve as a bullshit test
(if you sell at 25% above historical prices and don't have a very good reason
to do so).

It is a given that the price will be very different depending on the state of
the property, the quality of the building and its era (1900-1930 flats command
significantly higher prices than 1970-1980), whether it's a narrow alley or a
large boulevard, whether it has windows on only one side or both sides,
whether there's a window in the kitchen and bathroom, and whether part of the
building belongs to the public housing agency (among many others). After a
while, you start to get a pretty good intuition of how high a property will
sell above or below the average.

Another thing about subjective experience is some properties fit certain
lifestyles and will be priced accordingly. A flat in the Bastille area (lots
of bars, restaurants and night clubs) appeals to people who would pay for the
privilege a bonus that a boring father of two (like me) wouldn't consider.
Conversely, having an address in the Quartier Latin makes it easier to enter
the top high schools, so tiny one-bedroom flats sell surprisingly high (and
are then rented out to university students for a far lower price than the
purchase price would suggest).

------
andrewstuart2
Working at a huge tech company like Google or Facebook is attractive to me,
but not enough to justify spending $2.5M on a smaller house, or 12x more per
square foot. And this is just in Phoenix. I know there are other places with
tech jobs and much lower cost of living, or better income-to-COL ratios.

~~~
aqpgreendragon
They aren't paying that much for the house. They're paying that much because
it's located in a good area. They'll knock it down and built a brand spanking
new house and sell that for a profit. This happens every day in hot real
estate markets

~~~
brianwawok
The description kind of hinted the lot would be big enough for 2 houses. Would
the local lets law you flatten the house, build 1 house to live in on half the
land, and say sell the other half of the land for a million bucks to a
developer?

~~~
hkmurakami
You go through a city planning commission to do the sudivison.

~~~
methodover
Startup idea: Let people pool money to buy larger lots and do exactly this.

------
koolba
> The four-bed, two-bath house — less than 2,000 square feet — listed for
> $1,688,000 and sold for $2,470,000.

Using a ballpark figure of $500/mo per $100K of house, this comes out to
$12,500/mo. That's $150K/year, mostly after tax (there's a bit of a deduction
for interest but let's ignore that for now). Using the standard 30% rule, that
means you should have a gross income of about $500K.

What I'm questioning is, how many people are there with that income level to
eventually sell these insanely expensive houses to? Sure you have a bunch of
all cash offers but that eventually dries up as well right?

Plus 4BR at 2000sqft isn't particularly spacious. And only two bathrooms at
that size? IMHO that's insane.

~~~
flachsechs
a lot of buyers are coming in with 500k+ of equity, sometimes over a million
dollars, sometimes ALL CASH because they liquidated a boatload of stock and
are now upgrading their living situation.

your mortgage numbers are way higher than reality. another concern is property
taxes, but even at 2.5M, that's less than 30k/year in property taxes -- a
working power couple or one single high earner can easily pay that. and in 20
years, 30k/year will have less than half the real value.

i think someone leveraging themselves into a 5-figure/month mortgage is the
exception, not the rule.

tl;dr people are rich these days. my real concern is social unrest because of
these insane imbalances in wealth distribution.

~~~
benmarten
I'm not sure if its accurate, but
[https://www.redfin.com/CA/Sunnyvale/1129-Prunelle-
Ct-94087/h...](https://www.redfin.com/CA/Sunnyvale/1129-Prunelle-
Ct-94087/home/1376492) lists the property tax for last year at 1504$?

~~~
braindouche
That's a pretty good tax bill for a house assessed at $150,000, which to me
suggests that the neighborhood hasn't been reassessed since it was built. I
bet that won't last much longer.

~~~
koolba
CA has a state wide law that prohibits reassessment unless there is a change
of ownership or substantial renovation. Property taxes growth is capped (I
think at 2% or inflation, whichever is less). There are many houses that were
bought in the 60s or 70s that pay peanuts in taxes. This is partly (or
primarily depending on who you ask...) why the CA school system so screwed up.

~~~
Balgair
Primarily, for me. My folks pay ~$150/mo in sum total of taxes, electricity,
etc. (no more mortgage now, so large caveat). Their neighbors, in the exact
same house plan, who paid ~$950k, most likely pay ~$4500/mo. My folks have
nothing to say to them, they live in totally different worlds despite being
neighbors. The neighbors on the other side are pretty much meth-heads, but the
trust scheming makes their monthly payments a bit more than my folks. Imagine
that, you pay ~4.5k/mo, two hours out into the 'burbs, and then 2 doors down
is a literal crack-house. Prop 13 just distorts things so much, it destroys
neighborhoods by freezing them.

------
matt_wulfeck
It's a 13k lot a mile from Apples new campus. The person who bought it knows
it's potential. Even if you make 10% of that initial investment you're still
doing amazing.

~~~
austenallred
There are an incredible number of Apple employees worth tens of millions of
dollars that would love to not commute. The potential to rebuild a monster
house on this lot next to Apple is definitely quite valuable.

Location, location, location.

~~~
bogomipz
>"There are an incredible number of Apple employees worth tens of millions of
dollars that would love to not commute"

Is there really? Can you quantify what an "incredible number of employees" is
here? Thousands, 10s of thousands? Do you have a citation for that statement?

Why would so many people worth 10s of millions of dollar be competing for the
same properties/ Also why are so many people worth 10s of millions of dollars
still working at Apple?

~~~
csomar
I don't know how much jobs Apple has now but the new Campus is "huge". Like
really gigantic. Apple is a wealthy tech company and even if it is not paying
high salaries, I expect lots of employees have made a killing from stock
options in the last few years.

~~~
bogomipz
Yes they have a new campus and yes Apple is rich but that does not mean their
employees are rich. How do you imagine employees "made a killing"? Do you
think that Apple just hands out stock grants to everyone? Company stock is an
asset like anything else, why would would they just be giving it away?

~~~
csomar
Stock options are a part of the compensation especially for startups. But
regular companies do it too. They do it because it is "free" money at least at
the time of issue.

Apple new campus is both huge and the "flagship". It means Apple top employees
will work from there. It has a 12,000 employee capacity. There will be
hundreds or maybe thousands of top executives, top managers and high-grade
engineers. I'm pretty sure the compensation for those is very high.

~~~
bogomipz
It is not "free money" at all, it is an asset like any other on the company's
balance sheet.

For a publicly traded company such as Apple it wouldn't be options but RSUs
and they are a percentage of you salary. And you still have to pay tax on them
just like normal salary.

Just because the built a new large campus it doesn't mean that the majority of
people there will be worth tens of millions of dollars. Very senior management
sure, rank and file engineers - not so much.

------
ryandamm
For all the comments about listing shenanigans, we're overlooking a basic game
theory issue here: when you set a price that looks to be near the value of the
home, you're saying you're willing to accept reasonable offers. You're setting
an implicit cap on the value of the home.

An obviously undervalued home, though, in addition to driving up interest (and
creating a bidding war), suggests a much fuzzier cap so there's less signaling
around price and a less obvious ceiling to offers. In other words, buyers are
stuck wondering what other buyers might offer, rather than discussing whether
to go some normative amount over the ask (like 10-20%).

Also, there's a 'curse of the winner' dynamic in auction-like environments,
where the deal will necessarily go to the party that values the asset the
highest. (This is evidently destructive to profits in oil and gas leasing
auctions, for what it's worth.)

I think that's the dynamic, because no one is actually fooling anyone by
underlisting prices, and real estate agents talk to each other and know
immediately if something is priced to generate interest, or if the price is
closer to what the buyer expects.

------
jarjoura
Yes South Bay is so overpriced right now it’s ridiculous. Keep in mind that 5
years ago that same house would have sold for 650k and even then people would
have been complaining that’s it was way overpriced.

One things certain, east bay across the 84 is still under a million at the
moment. I suspect that will change soon.

~~~
jondubois
Yes, I bet that in the near future, a modest house will cost $20 million,
Bitcoin will be $100K per coin and Facebook will be a $10 trillion company.
Poor SV suckers will spend their lives paying off their $20 million shoeboxes
with their $500K per year salaries. Meanwhile I will be living in some exotic
place in a mansion which I will have bought for $200K. I like where the future
is going.

~~~
exclusiv
Yeah I'm in Southern California and I could buy a primary but I'd have to
spend at least $1.25M for a small place where I'd want to live. It just
doesn't make sense though. I rented a $2M house last year for $4.3k/mo. It's
just way cheaper to rent at that level. You're either renting the house or
renting the money (mortgage).

I've been buying investment properties for $500-600k each that cash flow
instead. I don't want to rely on appreciation and I don't want to come out of
pocket to cover the debt. The cash flow offsets your liability and improves
debt to income so you can get approved for buying more cash flowing homes
(once you can show income). So you should be able to buy a home at least every
2 years.

I may buy a primary if the market corrects, but otherwise I'm perfectly fine
renting my primary. Too many people get infatuated with the idea of owning a
primary residence. If you live in an expensive area, it's best to earn the
higher salary there and rent, invest elsewhere and move somewhere cheaper
later.

------
ccorda
Redfin listing: [https://www.redfin.com/CA/Sunnyvale/1129-Prunelle-
Ct-94087/h...](https://www.redfin.com/CA/Sunnyvale/1129-Prunelle-
Ct-94087/home/1376492)

------
habosa
Aside: I don't think it should be legal to not accept the asking price for a
home. With any other thing I want to buy, if I agree to pay the list price I
get the item. Sometimes I can haggle the price _down_ but the listed price is
always accepted.

This system of listing a price to 'get people in the door' and then igniting a
bidding war makes it impossible for anyone to shop for a house except for
realtors who are 'in the know' and can tell you the real price based on
listing.

~~~
lsadam0
> Aside: I don't think it should be legal to not accept the asking price for a
> home.

You're attacking basic supply and demand here. Let's say I set a list price
and then figure out I could have asked for more...you want to legally bind me
to sell for less than what the free market is willing to offer? Where does
this stop? Should we ban speculative investments as a whole?

~~~
blackskad
No, it just reverses the dynamics: instead of starting out low to get people
into the door, you start with a list price that's too high. If the bids you're
getting are always far below your asking price, you know the free market isn't
willing to cough up what you want, and you lower the price to something that
is more in range. If your initial asking price is $1MM and all bids are around
$800K, consider dropping the list price to $850k and see if they want to play
now.

That's the usual dynamic in Belgium.

~~~
loeg
So why is this better, exactly? Seems like it just takes longer to accomplish
the same goal (finding FMV). Buyers are still not guaranteed their offer will
be accepted unless they gratuitously overpay (by offering list price).

~~~
blackskad
You're assuming all the sellers are always overpricing by a very large
percentage and that nobody accepts a lower offer.

What usually happens though, is that you determine an estimated FMV (eFMV)
based on recently sold properties in the neighborhood that are similar in
size. Experienced realtors are usually quite good at this. You can add a
factor to the eFMV to get your list price. As a seller, in the worst case, you
may have to drop your list price to your eFMV. Best case, you get a nice
bonus. When there are multiple bidders around your eFMV, but under listing,
you have some leverage to get a higher bid. Let's assume your eFMV is 850K.
"Look, I have a bid of 850k. You're at 825k. My list price is 900K, but if you
bid 875k now, it's yours guaranteed." It looks like a steal in the buyers eyes
("25k below list price!") and you get a nice 25k bonus over the eFMV.

As a buyer, this silent "list price is always accepted" rule, gives you the
ability to properly filter properties because the list price functions as a
cap. This saves both buyer and seller time because you're not chasing
unreachable properties. You can also get a realtor to get your own estimated
FMV for the property that looks interesting. It's up to you to decide if the
certainty of the buy is worth the difference between list price and your eFMV.
If not, you can always bid something lower, closer to your eFMV but with the
possibility that someone outbids you.

The process usually is really fast, because realtors are good at estimating a
FMV, most sellers realize they shouldn't expect a huge premium over that
estimate and buyers accept a premium for the certainty of an immediate sale.

~~~
loeg
I'm not assuming nobody accepts a lower offer. Just that sellers will overpice
FMV by some margin (as you confirm) and eventually accept the highest bid
under list (seems confirmed too).

------
dagw
I guess it must be a cultural thing. In major cities in Sweden 15% over the
asking price is the asking price and 50% over the asking price, while rare, is
hardly unheard of. No seller ever accepts the asking price unless they're
really desperate.

~~~
thriftwy
I've read that in Sweden, participation of recent immigrants in economy is
lower than in most other European countries.

Why not create some jobs for them at building new homes and propping price
down? Genuine question.

~~~
dagw
You can't build houses without land to build on, and desirable land makes up
most of the price of desirable housing.

~~~
thriftwy
I don't think of Sweden as a country that lacks land.

Population of Sweden is comparable to that of Bay Area but seriously.

I imagine if you could just go and buy a home in "the next suburb by the road"
really affordably, it would deflate prices for most desirable places too.

~~~
dagw
If you could just get plenty of cheap land in the suburb down the road someone
would have built houses there 30 years ago.

Sure there is land and there are plenty of places where you can buy a nice
house for less than, say, $100k. However none of those places are within a one
hour commute of where any jobs are.

~~~
thriftwy
Well, I'm looking at map of Sweden near Stockholm and sure as hell I see a lot
of place for building up. Glades with direct access to highway.

~~~
dagw
And you think that the reason they haven't built on that land is lack of cheap
labor? Labor costs are simply not a factor when it comes to the economics of
building houses in and around places like Stockholm.

~~~
thriftwy
I think that the reason they haven't build on that land is unwillingness to
build on that land.

They surely can overcome this unwillingness, can't they?

And then they actually have access to labor already. Makes things better for
virtually anybody, excluding some rent-seekers.

~~~
dagw
_They surely can overcome this unwillingness, can 't they?_

First of all it's not like they're not building in Stockholm. Secondly most of
that 'unused' green land you're probably looking at is public parks and nature
reserves. So it really boils down to a debate on the value of nature reserves
vs more housing.

 _Makes things better for virtually anybody, excluding some rent-seekers._

and people who see a value in public parks and nature reserves.

~~~
thriftwy
You can discern nature reserves, public parks and "wild" parks when you look
at OSM, for example. That still leads to some place to develop on.

There is no debate. You can always build up around a city. Housing prices
bubble shows they're not building fast enough, by far.

Not building is a non-solution. It's not sustainable.

------
lisper
About a half hour north of Sunnyvale, there is this brand new 3300 sqft spec
house offered at 2.5M:

[http://www.glenlochway.com](http://www.glenlochway.com)

It has been on the market for months without selling.

[UPDATE] Downvotes? Seriously? Why?

~~~
dandr01d
What's the catch?

~~~
lisper
It's on a small sloped lot, so it has no yard. And it's not in Sunnyvale.

------
sureshv
Listing under to create a bidding war is definitely a thing in the Bay Area.
It's really gotten out of control the last few years. From last month:

Listing: $2M - [https://deleonrealty.com/property/4136-briarwood-way-palo-
al...](https://deleonrealty.com/property/4136-briarwood-way-palo-alto/)

Sale Price: $3.2M - [https://www.redfin.com/CA/Palo-Alto/4136-Briarwood-
Way-94306...](https://www.redfin.com/CA/Palo-Alto/4136-Briarwood-
Way-94306/home/1391820)

------
misterbwong
This is absurd but not quite as absurd as the headline makes it out to be.

FTA:

 _Over-asking sales are at least partly the result of agents’ sleight of hand.
It’s become common strategy to list homes under their market value in order to
entice Silicon Valley buyers; they are all too willing to fight over the few
houses available in this chronically tight market [...] Given prices to the
north, spending less than $2.5 million for a house in Sunnyvale on a large lot
— about 13,000 square feet — “wasn’t a wrong move,” Kalkat said._

------
bsvalley
I see this everyday in the Bay Area. In this case it seems to be a tech
worker. Usually these are bought by some investors in China and the houses are
never occupied.

~~~
ryandamm
I doubt that's the "usual" case -- yes, cash-only transactions occur, and
foreign investment buyers are in the market, but I don't see a ton of vacant
homes. I recall hearing from a real estate agent that foreign purchases were
fewer than 10% of the transactions, but I have no idea what her source was.

Vancouver circa 2016, though...

------
luckydude
"Large lot - 13000 square feet". So I'm not anywhere near as good of a commute
location, takes me 25 minutes to get to Los Gatos, so getting to Apple is
probably 40, but I've got 15 acres, a main house almost twice as big (it's too
big in my opinion, just gathers junk, so not necessarily a plus), a barn that
we have turned into 1/4th man cave, 1/4 exercise room, 1/4 chicken house, and
1/4 barn, and a 1 bedroom guest house, and a 1500 square foot shop, and a
quonset hut you can park 3 or 4 semis in.

All for less than what that buyer paid, admittedly 10 years ago. So it's in no
ways apples to apples. My guess is my place is worth about what they just
paid. Yeah, my commute would not be great if I worked at Apple, but you guys
remember Rands in Repose, right? The manager dude with the blog about
managing? Worked at Apple? He's my neighbor. We've got lots of
Google/Apple/whatever people up here, you get way way more house and property
for your money and you are not living right on top of each other.

If you are house hunting and you want to consider the mountains, PM me, I'll
hook you up with an excellent real estate agent. It's definitely not for
everyone, if owning and running a generator, tractor, chainsaw seems nuts to
you, yeah, not for you (though I didn't know anything about tractors before I
moved up here, now I own two and an excavator and do jobs for $1000/day).
Happy to answer questions on or off the forum about the mountains, I frigging
love it up here.

I'm blown away that people will spend that much for a boring ranch house on a
little lot. I could get it if it were downtown Mountain View, that's pretty
pleasant, ditto Palo Alto, but Sunnyvale? That seems nuts.

Does anyone else feel like it is a bubble? Or is this the new normal?

~~~
rconti
I have zero desire to own a big house in the mountains. Like you say, it's not
for everyone. _shrug_ The land, house, commute, dealing with septic and water
services, all sound like a lot of work.

~~~
luckydude
It is a lot of work. We've got a saying in the mountains: there is no need for
a gym membership :)

But there is some satisfaction from learning how to run a tractor, fetching
fresh eggs from the hen house, etc.

I lived in San Francisco for 19 years before I moved here, I like it here
fine. Very little in the way of neighbor problems.

It may be an age thing, I remember when I was in my late 20's going
backpacking with a friend who said "when I have enough money I'm going to buy
40 acres in the shape of a square and put a house dead center." I remember
thinking why on earth would you want to do that? Then I had neighbor problems
and the light went on.

I like it but you are absolutely right, it's not for everyone.

------
oldsklgdfth
As a skeptical home-owner of a modest town house this screams housing bubble.
The only thing left is to figure out how to make money off of it.

------
Mankhool
Please come to Vancouver, BC. We have bidding wars on houses and many have
sold WAY over the asking price. Here's a fine example:
[http://www.cbc.ca/news/canada/british-columbia/vancouver-
tea...](http://www.cbc.ca/news/canada/british-columbia/vancouver-teardown-
real-estate-1.3449869)

------
aidenn0
As a tech worker with a large family (this house is too small for my family),
I believe I am now officially priced out of every moving to SV. And that's
with me being quite wealthy; I have about $1MM in equity in my house, and
various other investments and retirement savings.

~~~
cdkee
South San Jose (Evergreen) and the East Bay would be within your reach most
likely.

~~~
aidenn0
What are commute times like to where the jobs are from those (Cupertino, Palo
Alto it seems)?

~~~
edison85
Many jobs actually are in San Jose and Sunnyvale. About 45 mins from evergreen
which has great schools, safe, big houses on big lots. $1.7M would be 3k sq
feet

East bay to the valley is not possible for commute under 2 hours

------
Jeremy1026
My $235,000 home is also 4-BR, 2-BA, 2000 sq ft. Its just located on the wrong
coast.

------
trhway
>The property is one of more than 50 South Bay homes that sold in the last
month for at least $200,000 above the listing price. More than half of those
deals were made in Sunnyvale. Others were made in Cupertino, Saratoga and West
San Jose

as they mentioned this house is close to that humongous Apple new campus, and
the mentioned areas - too. Given the current traffic and what it can become
near that campus, one can understandably want to live closer, especially given
the current fashion for the biking, walking, etc.

------
Iknowsecurity
Some areas in Vallejo above Oakland are also currently rising in price pretty
quickly. After San Francisco, even Oakland is running out of affordable
houses. There is a Ferry that goes from Vallejo to the Ferry building in San
Francisco with free wifi. Unsurprising more people decide to live there.

------
rbanffy
After living in Dublin, Ireland, for a year, this looks rather unimpressive.

------
napolux
If they keep paying for it, you should just really rise prices.

It's the market, baby.

~~~
loeg
Yes, presumably the asking price was just far under market.

------
Justsignedup
I remember a time when a company would open a campus, and provide cheap
housing rental or purchase but only to employees.

Now the same is happening, except with crazypants pricing.

------
Iknowsecurity
A colleague that was looking to buy a house last Spring said that the house he
put a bid on in San Francisco sold for 100% above the listing price.

~~~
ryandamm
I assume that's last "spring," and not that your team is doing agile real
estate sprints. But I'd be happy, and rather curious, to be wrong....

~~~
Iknowsecurity
Fixed. Thanks!

------
anticipation
I'm guessing it's bitcoin money !

~~~
madamelic
Yeah, right after 10% drop in value is a fantastic time to cash out...

~~~
IncRnd
It's actually right after a 50% rise.

------
SCAQTony
If the house were for sale by a politician I wold suspect that it was one hell
of a bribe!

------
loeg
They're paying for that 13,000 sq feet of property, not so much the house.

------
misiti3780
And I thought NYC RE was bad .... Northern California is out of control

------
bobosha
are there any affordable places in around SF? North Bay or Berkeley or further
south? or are they all just as insane prices?

~~~
rconti
No; everyone's already thought of that. Your cost will be inversely
proportional to your commute misery.

Though as mentioned elsewhere here, the Santa Cruz mountains are the biggest
bargain in the area. By far. It's just not for everyone.

------
CPLX
Greetings from New York.

You people are fucking insane, for the love of God please consider building
some apartment buildings.

Cheers.

~~~
wott
Someone who wants a house is not really willing to have an apartment. Someone
who is ready to put this amount of money in a house is definitely not willing
to get an apartment.

~~~
matthewowen
Yes, but some people would prefer to have an apartment and save some money,
and that would overall create less demand for the available homes.

End result: people who want apartments get them, people who want houses still
get them and pay less for them too.

~~~
zaroth
That's not how it works. Anyone in the market for an apartment isn't driving
up demand for this $2.4m $1,200/s.f. house.

------
wnevets
Isn't this how trump is accused of accepting bribes from the russian
government?

------
megamindbrian
HEY! MOVE TO PHOENIX. HOUSES ARE CHEAP!

