Is that low house price for real? (“It’s in my budget!”)
Berkeley and Oakland house hunters are all too familiar with house listings at prices that seem too good to be true.
They often are! The East Bay has a long-time tradition of pricing homes for sale low to attract attention and drive the selling price up in a bidding frenzy.
Why? Someone began doing it long ago, and it stuck.
In this video, East Bay home buyers get tips with how to decipher if a low house listing price is real and how popular a house might be to know how high it might go. Get in touch with feedback, for Berkeley home buying help, and anything else!
Prefer text to video? Here’s the transcription, so you can learn how to analyze house prices like a real estate pro:
You start looking online at Zillow, at Redfin. You see these incredibly low prices.
You might pop into an open house. Could that beautiful, perfect house really be $899,000?
Today I will share some thoughts about how to decipher those house prices you see in Berkeley, El Cerrito, Oakland to get the answer to: IS THAT HOUSE PRICE FOR REAL?
This real house price analysis is based on a real home buyer’s question…
“We found this very nice house, the location is good, close to the hills yet walking distance to BART. It looks spacious, the price is attractive. What do you think?”
What do I think?
I smell a rat! I start doing research.
As a little background, in the last 6 months in Berkeley the median (home) value in Berkeley was $1.61 million. El Cerrito $1.38 million. Oakland $902,000.
Again though, when you see that, there are unicorns to be had, and I will help you understand how to spot those.
Steps to analyze a house price:
First of all, as far as that rat that I smelled, I look at:
Does the house check all of the popular boxes that the most affluent people who have been making cash offers in the last year look for?
That would be a house that is:
- move-in ready (“I don’t want to do any work!”);
- has curb appeal (Sometimes when as a new buyer they ask you “What do you want your friends to think when they arrive at your house?” That’s kind of what curb appeal is!
- Is the location incredible?
- What is the style? Mid-century modern has been very popular. The layout and flow are important. A house that doesn’t have a standard layout that we all can comprehend as what a house should feel like…those houses tend to sell for less.3 bedrooms, 2 baths is probably the most popular. Bay view — I need not say more.
- In California we LOVE indoor – outdoor living. (Yesterday I saw a house that had a gigantic, fixed window on the back of the house, screaming to be a patio door down to the garden in the back.
- Is it walkable? Is it in a good school district? Even if you don’t have kids, it’s a great investment to buy where the schools are good.
- Overall, what is the city like? How is it run? Is it growing in a positive way? Or are things going down hill?
This all can add up to the desired lifestyle — and as you see in the picture, being near a Trader Joe’s or a Whole Foods is always a bonus.
Nowadays people are saying “I don’t want to maintain a pool.”
You may think a pool is desirable. Not necessarily!
What is the house’s condition?
This was a fantastic fixer, all original, in the Berkeley Hills. It had appliances from the ’50s.
It was a NICE house. Fantastic views. Listed at $749,000, off of Grizzly Peak.
You can imagine the views!
It sold for 48% over asking, which was last Fall, for $1,105,000.
A few months later, the house was totally re-done. You might say re-imagined. See that staircase there? That’s the
one you saw in the previous picture.
It was listed at $1,180,000. It sold for $1,825,000, just a few months later —a 55% increase over that price that the “flippers” had bought it for — and $720,000 higher than the last sale.
What I had said to my client was: “Great foundation!”
They really could have bought it and made a few changes and had a great home. Now it’s a FABULOUS home that someone who could afford $1,825,000 is enjoying.
Analyze a property’s potential – not just the house’s potential
In addition to the house’s potential, nowadays it is really important to look at the property’s potential. California has made it easy to add ADUs and in many areas to split lots into 2, that could ultimately become 2 different properties where you could sell one property.
For example, this was a decrepit Victorian in Alameda. And a field of dreams in the back yard with a very wide driveway. All I could do was look at the potential of that backyard.
Some other examples are a house in that little photo in the Claremont area of Berkeley. The house was good. The lot was GREAT, with part of it zoned for a commercial building that could have been built on it.
If you see a multi-family, with one vacant unit, the potential there could be to offset your mortgage which is called “house hacking.”
How well is a house for sale being marketed?
In addition to the aspects of the house, you want to look at how well is the house being marketed.
Is it kind of sleepily there with an agent who’s not local, who’s not connected to a lot of other agents? Are they doing several open houses?
You can take a look at Zillow, Redfin, and other sites like Realtor.com to see:
How long has it been on the market? How many views? How many saves? Does it have a 3-D tour online? Videos? Things like that will get a house more visibility and more competition.
Another factor: What’s the story on the seller and the sale?
- Do they want a quick sale? Are they willing to take a lower price? Are they motivated to just get cash? They might take a cash offer over a higher non-cash offer.
- When a house is owner-occupied also, it makes it more difficult to show. There’s usually fewer showings, and it takes a leap of faith for someone to buy it [sometimes].
- Time on market…has the house come BACK on the market? In that case, they’re going to be eager to sell. If it’s been, you know, in escrow for 2 weeks and now it’s not, and it had been on the market before that for 2 weeks…
Lately here in July 2022 we’re seeing lots of “price changes!” “price improvements!” “price corrections” — What you’ll never see is the phrase NEW LOWER PRICE, which is what they used to say. Now there’s every kind of euphemism to say that.
Something every REALTOR® should do to help you is to do a report on recent comparable sales.
AND try to decipher the condition of the houses in those sales and also look at what the market was like then versus now. It’s quite a difficult time to depend on a compables report when the market is changing so quickly due to the higher interest rates.
Going back now to the question: Is that price realistic?
As you can see — it depends!!!
Going back to that house that my client wrote to me about, I immediately knew that that was a low price to attract attention.
They said it probably had a certain local famous architect who designed it. It was remodeled perfectly with Heath tiles, which you may know are made in Sausalito and are the creme de la creme of tiles.
It has a beautiful, mid-century style, indoor-outdoor living, a converted garage that could be a studio or work-at-home setup.
It did have fewer bedrooms than are most popular and no parkable garage (for your Tesla). 🙂
HOWEVER the listing agent reported that they were expecting 8 or more offers. This house is a winner, checking enough boxes that in this market it is certain to go over $1 million.
And I have some predictions that I don’t wish to have on record on a recording. But you can message me to see if my price was right!
I love talking about buying strategy and understanding what a house might sell for, depending on so many factors.