You prep your house to sell by getting all inspections done ahead of time and staging it reasonably for showing. Agent-only open house tours are on Tuesday in my neighborhood. Buyers' agents make a short list of properties worth visiting with their clients. Open house on Saturday or Sunday, take offers the following Wednesday or Thursday. Expect 10+ offers from pre-qualified buyers. High bidder takes it, assuming they have a clean offer and financing.
If any house in this neighborhood sits on the market for more than two weeks, everyone wonders what is wrong with it.
As a seller, though, it is a one-way trap door. If I sold today, I'd never be moving back into the same neighborhood.
Someone below said to the effect that is is a push-in bought for the land. That happens, but not so much in this neighborhood. The houses were built in the 1960's and are well constructed. There are older homes in some areas that are smaller that are the push-in candidates.
BTW -- I chatted with a neighbor that was one of the original buyers on my street in 1961. The four bedroom floor plans sold for $21,000. $22,000 if you wanted insulation in the walls. Oooof
In suburban long island NY, plenty of homes sit on the market for months, in good school districts, near halfway decent jobs.
I can't believe it, but I guess I should, that Sunnyvale has so many high paying jobs and so little land that buyers are swarming like bees to a hive.
This is a market that literally 99.3% of the world is priced out of.
In the US, sometimes houses are priced "low" intentionally and the listing agent says something like "offers will be accepted until noon Monday" to encourage over asking, all cash offers, and waiving inspections.
Sometimes, houses are also sold at auctions in the US. This is common for foreclosures and seizures, for example.
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.
If you're selling on your own, there's really no guidelines.
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.
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).
1) having a lower price attracts more bidders, and the bidders may go much higher than they originally planned after they see it in person.
2) having multiple potential buyers in the mix creates urgency, which drives the price up AND lets you sell faster.
3) Homes aren't free to own. Most have mortgages that you waste money on interest again each month, amongst other things (taxes). Selling fast for cheaper may not be less money in the end.
4) Homes on the market for a long time get tainted. People get worried there's a reason no one has jumped on it yet (maybe there's a sinkhole under it, or the water is bad, or some other thing you can't tell in a driveby).
Supply = Very limited.
Demand = Increased and ever increasing.
Result = $$$$$
For mainstream properties, from my experience the market is saturated with people who price above market rates and would rather wait for months than accept a significantly lower price. If you see something that you might consider buying with a 20% discount, you usually don't bother visiting the place. This likely drowns out the people who are trying to set up auctions by setting a very high ask price.
Put differently: while the specifics of this sale (price well above asking) might be impossible in France, the "sale price well above rational market price" phenomenon is really hard to quash when the market chooses to be irrational for a while.
It seems that the English auction goes much faster for the seller, whereas in the french house market, the buyer is the one having a fast process since as soon as they find a good home with a price they like, they can just decide to buy.
That being said, capital controls are an entirely different beast.
I've seen a variety of property systems in different parts of the world. In Sydney and Melbourne for example, it's hard to work out what anything will cost because the majority of properties are sold at auction. If there's a listed price at all, it doesn't tend to tell you a lot.
I haven't seen the state of Switzerland in more than a decade but from my time there, they seemed to have a pretty reasonable system. It's one that basically discouraged property speculation in that short term sales of property attracted high, even punitive, rates of taxation. This could be close to 100% of the gain if held for under two years.
There's two basic problems with global real estate as I see it right now:
1. Real estate is not a reportable asset under FBAR (the US foreign asset reporting framework to ostensibly clamp down on money laundering). As such, it's becoming pretty clear that real estate in the world's great cities are being used for money laundering; and
2. Real estate is being used to park vast amounts of foreign wealth. This is the case in Vancouver, London, NYC and a host of other places.
Now if a bank takes money there is a lot of requirements placed on the bank, so called KYC (Know Your Customer) frameworks. In most cases this simply isn't the case with real estate. Why not? The true owner is hidden behind an LLC in any high end property sale in NYC.
But (2) is the big one. I'm a firm believer that New York, for example, should be for New Yorkers. Not Russian and Chinese billionaires.
Australia has a regime where property purchases by foreigners need to be passed by the FIRB (Foreign Investment Review Board). This typically means new developments. This is a somewhat flawed system as it means apartment buildings are built for and sold to foreign investors. This is killing inner city living.
In NYC ultra-luxury condos are taxed really low, probably the lowest (as a percent of market value) of any property kind in NYC. The reasons for this are complex and NYC can only do so much to fix it because it's up to New York state to fix it and New York state has a whole bunch of SFH owners who will fight property tax reform tooth and nail.
Property investors in general perform a useful service. Those houses and apartments you rent have to be owned by somebody. Kill that regime and where are people going to live? As an example, before about the 1970s, the UK had a virtually nonexistent private rental market.
So I'm all for:
1. High valued properties taking a bigger share of the tax burden (as a function of property value);
2. Restricting to some degree who can buy property in a city; and
3. Taxing non-working property punitively. By this I mean a property that isn't either occupied (by the owner or a tenant) the majority of the year.
This French system however of forcing someone to take the first offer is ludicrous.
: Reference to https://www.reddit.com/r/TheSimpsons/comments/2w2hjs/lisa_if...
re Sydney and Melbourne (and Australia in general)
FIRB is easily circumvented (just buy properties using a company structure, no need to tell FIRB now)
Also regarding the $800k overage paid, this kind of thing has been happening in Australian east coast cities for a decade, due to our govt refusal to enact Anti Money Laundering funds transfer reporting rules for accountants, lawyers and real estate agents.
Australian govt of both flavours review the AML reporting rules every 2 years since 2006 but never actually change it to include realestate.
So now I live in Melbourne's east in a 1930's house last renovated in 1980 that sold for $2.2 million earlier this year and I rent it for $650 a week.
Previous owners bought it for $1.1 million 8 years earlier.
Edit: It seems you're right!
In most real world transactions there's some back / forth with the lawyers about details (ex: "We want your ugly drapes!") as well as non-cash considerations. A seller may accept a lower cash offer over a higher mortgage based offer due to fear that the latter may fall through.
Of course, sellers prefer an asking price offer in cash, rather than with a loan that might be denied, so there's usually some (illegal) leeway if offers are received by mail. If you intend to make an offer contingent on a loan, make sure you print out the offer and bring it with you, and have the seller sign your copy. This lets you answer "There was another offer before you" with "That's not what it says on the paper you signed".
I'm curious to know more about how the non-discrimination laws apply here, since I know there definitely are laws, but if they are as blunt as described, then we'd expect to see more cash-offers-for-asking-price around here.
Maybe it's just the wording but I don't get that. If they're paying enough that 2.5M is within reach where it wouldn't be in Phoenix is it really a problem?
I'm in the middle of a job search right now and I'm finding that while absolute numbers sound appalling (ie. 2.5M for a 2,000 sq.ft. house) the income:COL is not as dramatic. I rent, but so far places that have high-end apartments that cost 2x what my current one does pay about 2x more (usually even a bit more) on average.
To me it comes down to wether you'd like to live in Sunnyvale or Phoenix as long as the companies in both locales are paying enough to afford comparable housing (I wouldn't expect identical square footage). Remember we're talking about a 2.5 Million dollar home 1 mile from what is probably one of the most advanced tech campuses on Earth (and probably has some of the best paid).
When you put it like that I don't think it's hard to see why some people would sacrifice a little square footage for living and working at a place like that over Phoenix in an instant (I know I would).
The point is that even a 3.5M for the new house will be a lot, but by virtue of it's location and salaries at Apple it's justifiable
2,5M, with respect to the existing market, doesn't appear to be out of the norm.
The idea being Sunnyvale can justify that with salaries and the employers in the area
You are not buying this with a $150k salary.
There is always the potential for a crash in the housing market, but it can also end up that the $2.5 million is a winning investment (as compared to being spent).
You can get a decent house in a nice location for $400k in Phoenix itself.
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.
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.
Interestingly, the Santa Clara county tax collectors will take several months to reappraise the property, and then they'll send a supplemental tax bill to cover the difference between the $125/month the prior owners were paying and the $2.6k/month the new owners will be paying. It's frustrating they don't just assess taxes correctly from the beginning, but they do things old school over there.
But also because the mortgage interest deduction tops out just shy of $1m, I believe. So the government-sponsored giveaway (being able to use pre-tax income to pay for your mortgage interest) tails off quickly, and the rational calculus around loan-to-value shifts dramatically.
Maybe not so much for new construction, but most houses don't have a master bath.
Probably an high-income couple with help from their families.
Plus, if you plan on raising a family then you'd have the added costs of a full time nanny as I doubt anyone with a $250K+ job is going to be around much to raise their kids.
: Which I'm assuming they are if they're buying a 4BR house...
I think there's a lot of people on HN who are unaware of how high comp is at the big 4/5 tech employers.
Location, location, location.
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?
Those (now rich) people still work at Apple, as do tens of thousands of other wealthy people.
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.
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.
But yeah, that has happened elsewhere in the Bay Area. (Zoning tends to prevent it, though, so there's an element of regulatory arbitrage.)
Though as you mention, zoning may prevent it. Some areas have 5,000 s.f. minimum lot sizes.
This neighborhood is probably the 5th or 6th best here. Los Altos same house would go for 3.5M, MV there is just 0 supply, Palo Alto would be around Los Altos, Cupertino 300k more expensive, only west San Jose/Cupertino border is comparable. Apple has been here forever. They have had their hq here forever and same with their 2nd and 3rd largest offices.
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.
One things certain, east bay across the 84 is still under a million at the moment. I suspect that will change soon.
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.
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
The extent of the upgrades to it make the sale price a little high, but somewhat inline with pricing in similar neighbourhoods across the bay, e.g. https://www.zillow.com/homes/for_sale/15561231_zpid/37.49241...
It think its just that some people get a lot of money through stock options that they spend this way.
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.
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?
That's the usual dynamic in Belgium.
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.
If McDonalds has their BigMac Meal labeled with CHF 12.50 (the current price in Switzerland IIRC) the cashier won't be able to refuse to sell it to me for that price even if I look particularly hungry and it's 4 O'Clock in the morning (and might thus be ready to pay more than 12.50). At least in Switzerland you are generally obliged to honor your displayed prices.
I have never bought a home (I'm a 23 y/o student), and I don't know if the process in the US would be comparable to the process in CH, but if a home is labeled with a price of say CHF 1'250'000 I expect to be able to walk in there with a bag with 1'250 CHF 1000 bills and pay for the house without additional price haggling. However I can imagine that this is not how it works (apart form the "pay with cash" part, which I know works for sure).
If the average market price for my neighborhood raises after my listing, am I not permitted to raise the price? How would you apply this reasoning to a stock market?
Finally, the "asking" price is not a contract. When my wife and I bought our house, there was a competitive offer that included "lifetime" seating at a popular restaurant near us. We had both offered slightly over asking, and this was 2009, so not exactly a "hot" market. Your solution would basically ask sellers to treat their house like a commodity, which might make sense in a spec home or developer deal, but really makes zero sense for two parties who are each making what is likely the single largest financial transaction of their life.
This is the sort of reasoning that people say that pay for the used car salesman's boat.
You are going to buy, what, 5 houses in your life? If you're a big mover.
Real estate agents spend their entire life doing the thing you do once every couple of years at most. Why do you think you'd be better than them?
You want to spend 6 months doing research? Real estate agents are spending years! There's a bit of principle-agent problems when working in this, but still. Beyond the information parity, there's simply knowing how to do sales and getting people to sign the contract.
Real estate agents have the same problem.
Of course they know more than I do about the process of buying a house. But knowing whether a house is worth more than asking and roughly how much over -- I can learn that specific piece of info for the houses I care about and my knowledge will be roughly equivalent.
The response to that is to either not worry about it or to have some entity fixing prices...
This is a modern phenomenon wholly reliant on the predictable cost of industrially-produced goods. Houses are different. Your proposal would lead to: most people (a) listing at $100 billion, (b) giving no listing price, or (c) becoming reliant on third-party pricing consultants, since you only get one chance to get it right.
Impossible and not easy for you?
So that is the harm you are stating? That you don't want to put the effort into understanding the market enough (without a realtor) to know the value of what you are buying? Plenty of people operate fine under the current system.
What's next? Do you want to have a lottery with a fixed and low price. That way people with more money and so on don't have an advantage.
Things are never equal. Some people have an edge. This edge is not entirely a realtor skimming as I think your comment implies.
> This system of listing a price to 'get people in the door' and then igniting a bidding war
Is it wrong for ebay to do this as well?
I am not saying we should simplify house buying to the same process as buying a cup of coffee.
I am saying that there is probably some price for which you're willing to forego negotiation and just sell it. This is like the ebay "Buy it Now" price. I think when most people list their house, they have this number in the back of the mind.
So let's start by putting that price out there. And maybe some basic conditions about how you'd like to be paid. If the perfect buyer comes along, you're done! This is currently not possible with our system. If the house is listed at $100k and I am willing to pay $150k I still start by offering asking to feel out the seller. If they had listed a "Buy it Now" price we could be done instantly.
Now let's say nobody wants to pay your buy it now price, they are free to make a lower offer. In the worst case, we get back to where we are now.
For all of the argument saying how hard it is to price a home and how nobody can get this number right because every home is unique, I don't think this is any harder than picking a list price in the current system. Most realtors pick the list price hoping to get x% more, depending on their market. Just include that x% in your "Buy it Now" price and be done with it.
There are instances of this kind of price movement in commodity products too, depending on demand. A rapidly selling product will get a bump to its MSRP, while the introduction of a competitor will cause price competition. It's not all that different in methodology - it just moves slower.
Be grateful that your local supermarket is no longer a street market, where each price has to be negotiated and haggled. Price discrimination there is rampant, so each buyer gets a personalized price tailored to extract as much as possible while still completing the sale.
Edit to add: Also, it occurs to me, if you go to ebay.com you can bid at auction for general consumer goods. So there's that.
Why is it "fair" for the buyer to be able to offer less, when they determine the house to be worth less than the ask, but the seller shouldn't be able to ask for more, when they find out there is a lot of interest?
You will find that your suggestion will make all houses more expensive.
Why not create some jobs for them at building new homes and propping price down? Genuine question.
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.
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.
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.
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.
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.
It has been on the market for months without selling.
[UPDATE] Downvotes? Seriously? Why?
Listing: $2M - https://deleonrealty.com/property/4136-briarwood-way-palo-al...
Sale Price: $3.2M - https://www.redfin.com/CA/Palo-Alto/4136-Briarwood-Way-94306...
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.
Vancouver circa 2016, though...
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?
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.
East bay to the valley is not possible for commute under 2 hours
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.
It's the market, baby.
Now the same is happening, except with crazypants pricing.
Though as mentioned elsewhere here, the Santa Cruz mountains are the biggest bargain in the area. By far. It's just not for everyone.
You people are fucking insane, for the love of God please consider building some apartment buildings.
In my experience, anything in the South Bay or Peninsula (in a decent area) that is managed by a large company (AvalonBay, Alliance, etc.) is going to start in the 2ks and go up a couple hundred each year.
You obviously lose some disposable income, but in exchange you're in Sunnyvale. The job market there makes CT's look like a joke and for growth as far as income is concerned in incredibly limited in most parts of CT compared to any areas around Sunnyvale, making it a great deal for younger people.
Source: I'm a New Yorker transplant to Palo Alto.
Also the lack of developers. Probably owing to concentrated land ownership, e.g. the Getty family. New York's structural consolidation was driven, in part, by private companies developing real estate and transportation systems.
Developers seem to play a unique political role in organizing, in absentee, renters. Homeowners tend to self organize. This is because (a) they bet a lot of money on their houses, (b) have the time and money to politically organize, evidenced by (a), and (c) stay put for a while. Renters don't naturally self-organise. Developers naturally counterbalance homeowners by seeking to (x) increase housing supply and (y) consolidate small plots into larger ones, thereby also (z) driving density.
If the Zillow data is correct, it looks like it's being taxed at a value of only $110k, ~60% of the original purchase price in 2017 dollars (from comment below). 
End result: people who want apartments get them, people who want houses still get them and pay less for them too.
There is plenty of supply below $2.4m. The 20 people who made offers on this house weren't interested.