It’s exhausting being a buyer because it’s so easy to get outbid. It seems like finding a house is a bit like trying to buy the new PlayStation 5. Let’s talk about that today. How much are buyers actually paying above the list price? And if you’re not local, what are you seeing in your area?
A spring market in the fall: First, here is a big market update I did for SAFE Credit Union (40 minutes). Enjoy below (or here).
QUICK SUMMARY:
- There isn’t just one amount buyers pay above the list price
- The market isn’t the same in every price range.
- We’ve seen huge growth this year between $10-20K
- About 80% of sales are somewhere between below list and $20K
- Not everything is getting bid up
- About 40% of sales sold at list price or below last month
- 2/3 of the million dollar market sells at list or below
- Higher prices tend to pay more above list (when above list happens)
- Only 3.5% of sales went $50K+ above the list price last month
- Look to the comps. Don’t just blindly offer above the list price.
SKIM OR READ IN DEPTH:
How much are buyers paying above the list price? Here are some brand new visuals to show how much buyers are paying above the list price. These might take a minute to digest. This image basically shows the total percentage of sales in the market. For instance, in the visual below 31.4% of homes last month sold below the list price, 9.9% of sales sold at the list price, etc…
Under $400K:
Between $500-750K:
Million dollar market:
This visual compares last year with this year.
Here’s the same information but with numbers. Do you like this better?
HOW MUCH ARE BUYERS PAYING ABOVE LIST PRICE?
1) Mixed results: There isn’t just one answer that applies to every price range and escrow.
2) The biggest change: In many cases buyers are tending to pay ten to twenty thousand over the original list price to secure a contract. About one in five buyers paid $10-20K over the list price last month. In some cases prices get bid up even more, but close to eight out of ten sales are somewhere between below the list price and twenty thousand above the list price. Keep in mind many buyers are getting a loan for the full contract price, so paying above the list price doesn’t always mean buyers are bringing that much cash to the table.
3) Not everything gets bid up: It might be surprising, but this month we saw about one in three sales sell below the list price. It just goes to show sellers have to price it right – even in this wonky market. We also have to be careful about saying “EVERYTHING IS GETTING BID UP” when that’s not true.
4) Million dollar market: The highest prices basically show if buyers are paying above the list price it tends to be more significant. But two thirds of all million dollar sales last month sold at either the list price or below the list price, so the bulk of homes in this range aren’t getting bid up like the rest of the market. Like I’ve said before, this is the most overpriced segment of the market.
5) Not sensational: Only 3.5% of all sales went fifty thousand over the list price last month, so let’s be careful about shining a spotlight on this tiny sliver and saying, “Everything is getting bid up $50-100K.” Nope.
6) Don’t offer above without looking at comps: Buyers, be prepared to offer above the list price, but don’t blindly offer $10-20K above without really considering the comps and advice from your agent. Remember, the market isn’t the same at every price range either.
7) Appraisers: These days appraisers are getting huge flack for “coming in low.” Look, sometimes appraisers are legitimately missing the mark, but other times properties are getting into contract way beyond what is reasonable, so the appraisal should come in “low”. Sellers, sometimes the highest offer isn’t always the best one if there is going to be an appraisal involved. And to my appraiser colleagues, our role is never to “hit the number”, but let’s be sure to account for the true temperature of the market in our reports.
Anyway, I hope that was helpful.
Questions: What stands out to you most above? What is it like right now in the trenches for buyers? Anything stories to share? Did I miss something?
If you liked this post, subscribe by email (or RSS). Thanks for being here.
Interesting that 5-10K seems to be the offer that gets it done.
It does get it done, though only about 10% of sales were in that range. It’s hard to talk about this because there is no one-size-fits-answer. I think the next level here would be to dissect each price range to see what the trend is in each range…. The data analysis never ends. 🙂
Hey Ryan,
Did you look at percent over list? 5k over a 400k list price is different than 5k over a million dollar list price…
Hey Joe. That’s a different layer to consider. I haven’t made my graph for November, but I do have a visual from last month that shows the SP/OLP ratio. That helps a bit as it generally shows the market at lower prices is more aggressive than higher prices as I said in this blog post. The struggle of course is the market isn’t always even either where the same trend happens with every property. It comes down to pricing also and that can be inconsistent. https://sacramentoappraisalblog.com/2020/11/10/overpricing-multiple-offers-hot-ranges/
I’m trying to think if there is a way to incorporate price ranges on these new visuals. If you have ideas, I’m open ears. For now I have other visuals to break down the market, but there may be a better way to consolidate it without writing a dissertation… I do like the new visual here as it tells a powerful story about the market as a whole. It just doesn’t drill down to specific price ranges (yet).
Okay Joe, I added two price segment visuals in the post. I’m glad I did this before it emails out to most subscribers tomorrow. This is all I have time for, but curiosity definitely killed the cat so to speak. What do you see?
My observations: Under $400K is seeing some strong price increases as nearly a quarter of all sales came in between $10-20K. When looking at $500-750K though it’s clear there are more properties coming in between $30-50K. But the difference isn’t profound when looking at these two ranges at least.
Thanks, Brian, very helpful! Wondering what percentage of the homeowners are doing extensions or major renovation to their existing houses instead of selling?
Thanks Jorge. I wish I had stats on that. I think we could likely look at permits being pulled on the local level, but I haven’t done that. I only wish I had time. I think many of us are hearing about renovations as well as pools being installed though. In short, it does seem there is more activity going on. This of course is something to watch. If people who are riding out the pandemic start to renovate their homes this could mean some of these people are poised to stay in their homes even longer.
The important part of the equation is comps and home condition. Do your due diligence and if somebody comes in way over list and it doesn’t make sense according to what the comps say, my opinion is they win. Good for you, you just payed a premium for a market priced home. The sad part is the buyer who is qualified for say $320K and they look at a fairly good home priced at $310K, it’s pending in 24 hours at $15K over list. They had no chance of getting that home. Until rates go up and inventory changes it’s the market we’re in.
Thank you Randy. I really appreciate your comment and I 100% agree. I tried to echo that in my post too. Buyers need to really consider the comps before jumping in with a huge offer over list price. Rates this low feel good for the moment, but it makes the market absolutely crazy though too.
I have been reading your blog for a while and just found out about your Youtube channel. The detailed analysis of the Sacramento market is informative, clear, and helpful. Thank you.
Thank you Jack. I appreciate it.
It’s getting ridiculous -I just got an offer $40K above list and we are priced close to the top of the market! No appraisal contingencies and willing to pay difference out of pocket . Why would you pay that much more for an ordinary home?? I recommend my buyers cap it at $5000 over appraised value, in case of rogue appraisal. As a listing agent, I’m mindful of what my buyers are going through and call every agent that submitted an offer and let them know why theirs wasn’t accepted and suggesting ways to make them stronger next time.
That’s insane. I feel for buyers right now. FOMO (fear of missing out) is real and it’s easy to make decisions about real estate in the moment based on emotion. Will you be comfortable with the decision in the future though? What if the market changed directions? Would you still be okay with it? That’s always the big question I have for buyers.
Exactly and my seller’s won’t accept an absurdly high offer either.