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multiple offers

How much are buyers paying above the list price?

December 1, 2020 By Ryan Lundquist 14 Comments

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?

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Filed Under: Market Trends Tagged With: advice for buyers, advice for sellers, Appraisal, high demand, market stats, Market Trends, multiple offers, offering above the list price, sacramento real estate blog, sacramento regional appraisal blog, sensational stats, trend graphs

Horses aren’t allowed & a big market update

January 14, 2020 By Ryan Lundquist 19 Comments

The other day a client asked me to include a statement in my appraisal that horses are allowed on the property. It was a huge lot, so it seemed like that might be okay… But I said NO for a very specific reason. Let’s talk about this and then for those interested let’s take a deep look at the local market.

A conversation with the city:

Me: Are horses allowed in the Tahoe Park neighborhood?

City: No. You need agricultural zoning for that to work. City of Sacramento code says: “It’s unlawful to keep, harbor, or maintain any bovine animal, horse, etc… on any parcel located in the city.” There are some locations that will work in the northern part of the city due to agricultural zoning, but not this location.

Me: What if it’s a really large lot though?

City: No. You need agricultural zoning.

Me: What if it’s an emotional support horse? (I wish I asked)

The point: On paper it might look like a horse property, but what does zoning allow? That’s the question. This is a good reminder to call the city or county to verify what is legally possible. To be fair owners can sometimes obtain a variance, but otherwise horses weren’t going to fly in this tract subdivision.

Class I’m teaching on Jan 16th: I’m doing a big market update at SAR from 9-10:30am. We’ll talk through the market, tips for talking to clients, and ideas for where to focus business. I’d love to see you there. Sign up here.

Any thoughts?

—–——– Big local market update (long on purpose) —–——–

This post is designed to skim or digest slowly.

A QUICK LOOK AT CONTENT

  1. Recap of 2019
  2. Loans & cash over the past decade
  3. The number of sales in 2019 vs 2018
  4. Distressed sales in Sacramento County
  5. Sales above $1M over the past eight years
  6. Sales below $100K over the past eight years
  7. Sales volume “recovery”
  8. Not a crash, but on the lower side
  9. Price growth is slowing down
  10. Comparing last year vs this year
  11. Price Cycles
  12. Housing supply is anemic
  13. More visuals for surrounding counties

Scroll down to see what captures your interest. There are a number of new visuals too. I used a different format. What do you think?

DOWNLOAD 145 visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

1) Recap of 2019: The year ended up feeling somewhat normal after a painfully dull last half of 2018 that left us wondering what would happen in 2019. Price gains were modest, there were slightly fewer sales compared to the prior year, and it typically took several days longer to sell in most counties (besides El Dorado taking over ten days longer). Here are some trends to watch in 2020.

2) Loans & cash over the past decade: These visuals are brand new and I hope you like them. Conventional financing has taken off this past decade, right? FHA used to be more common until conventional products began offering lower down payments. There was actually an uptick in FHA though this year, so let’s keep watching that. Cash sales are not a big factor in today’s market despite sellers thinking they are.

3) The number of sales in 2019 vs 2018: There were more sales at higher prices and less at lower prices. This makes sense for a market that showed upward price movement. 

4) Distressed sales in Sacramento County: It’s astounding to think that 84% of sales in Sacramento County were distressed in early 2009, whereas now we have fewer than 1.5% bank-owned sales and 0.5% short sales. People keep asking me if we’re poised to see these numbers start increasing again. Technically there’s really no place to go but up since distressed sales have bottomed out. But I wouldn’t expect these to increase dramatically because there’s no mechanism in place right now that would trigger mass-distressed sales. There is not the ticking time-bomb of adjustable rate mortgages or an economic collapse. But if we had a devastating economic downturn or some other huge issue, that could change things. There are definitely voices that talk about a coming “wave” of distressed properties, but this wave has not materialized despite prophecies for many years. Granted, bank-owned sales are up very slightly this year, but it’s not statistically significant. I’ll keep you posted with any changes.

5) Sales above $1M over the past eight years: This is a fascinating way to look at the market. I know there are many colors, but here is the number of sales above $1M for each respective year. What’s the trend?

6) Sales below $100K over the past eight years: On the other side of the price spectrum, here are sales below $100K. There aren’t too many these days. I know, everyone wants to go back to 2012. But the problem is financing was hardly available back then to so many people who had a foreclosure or short sale on their record. So even though prices were right so to speak, financing wasn’t.

7) Sales volume “recovery”: We’ve begun to see sales volume come out of a funk as it was down for over a year. However, there’s an asterisk to this news because we’ve seen sexier volume over the past few months, but we’re also comparing these recent months to a REALLY dull season last year. So of course the numbers today look better. My advice? Take this news with a grain of salt and save rejoicing for the spring season if we see this trend continue.

8) Not a crash, but on the lower side: As I said above, we’ve been having a definitive sales volume slump since mid-2018, but lately volume has been stronger. The number of sales this year has basically been down about 3% or so from last year in the region, though when looking at the past five years we can see volume is down closer to 5% or so. But here’s the thing. Sales volume this year was still on the lower side of normal (and even higher than 2014 which was a dull year). This is a good reminder to look at stats in a wider context instead of having tunnel vision stuck on one or two years. For reference, when the market crashed in 2005 we saw a 40% drop in sales volume over one year.

9) Price growth is slowing down: Price growth has been slowing, which basically means prices aren’t rising as quickly as they used to. Though technically the monthly and quarterly data below show higher price growth this year. Does that mean the market has been more aggressive? Has it begun to rebound? Not necessarily. I recommend being hesitant about sharing this positive-sounding news because the market was REALLY dull last year. Thus when we compare monthly and quarterly numbers today with dismal stats from 2018 it can really inflate the figures.

10) Comparing last year vs this year: All year long most price metrics have been up about 2-4% each month compared to last year, but these past three months they’ve been higher. This is likely due to stats sagging last year during a dull 2018 fall season. I know, I keep mentioning that. Additionally, mortgage rates went down a few months ago and we’re likely seeing some of the effect of that.

11) Price Cycles: Markets go up and down. That’s just what they do. Here’s a look at the past few price cycles in various counties. This is a fascinating way to see the market. Do you see the price deceleration in this current cycle? Also, in El Dorado County I pulled my stats just two days ago and the median price was down 0.1% instead of at 0% in my recap image above (that’s why the numbers are slightly different).

12) Housing supply is anemic: There isn’t much on the market right now, so buyers are hungry for good product. Remember, the spring market usually comes alive in the sales stats by March, but this means the market really started to move in January and February when these sales from March got into contract. Anyway, inventory looks to be mirroring what we saw a few years prior to last year’s dull season as you can see in the image directly below. There should be more homes hitting the market in coming months if we have a normal seasonal rhythm. Sellers, there’s nothing wrong with listing in January or February either. If you sense demand is there and especially if rates go down, you’ll have a captive audience.

13) More visuals: I know, there are too many visuals already. But here’s more. I never post them all either, so check out the download if you wish.

SACRAMENTO REGION (more graphs here):

SACRAMENTO COUNTY (more graphs here):

PLACER COUNTY (more graphs here):

EL DORADO COUNTY (more graphs here):

DOWNLOAD 145 visuals: Please download all graphs here as a zip file. See my sharing policy for 5 ways to share (please don’t copy verbatim).

Thanks for respecting my content: Please don’t copy my post verbatim or alter the images in any way. I will always show respect for your original work and give you full credit, so I ask for that same courtesy. Here are 5 ways to share my content.

Questions: What stands out to you about the market last year? What are you seeing right now? Anything to add?

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Filed Under: Market Trends Tagged With: 2019 market recap, 2019 real estate market, 2020 real estate market, cash, City of Sacramento zoning code, FHA, foreclosures, Home Appraiser, horses, House Appraiser, multiple offers, price growth, sacramento regional appraisal blog, sales volume shrinking, Short Sales, Tahoe Park, VA, Valuation

Not everything is getting multiple offers

October 2, 2019 By Ryan Lundquist 14 Comments

Everything is getting multiple offers, right? Many sellers feel that way, but it’s just not true. Today let’s dive deeply into what is actually happening with multiple offers. I’m excited about this and I hope you like it too.

Non-locals: If you’re not local, would understanding more about multiple offers help you? Could you ask your MLS about including a “multiple offers” field? This is how I’ve been able to extract data like this for my market.

FIVE THINGS ABOUT MULTIPLE OFFERS

1) A rhythm of multiple offers: There is a rhythm to seeing multiple offers in the Sacramento region. There are more multiple offers in the spring and less as summer and fall unfold. This isn’t a huge surprise, but it’s cool to see on paper. If you wanted to know, 42% of sales last month had more than one offer (which is what I mean by “multiple offers”).

2) The market isn’t always hot: It’s tempting to talk about real estate like it’s always “hot”, but it’s not. Every year the market heats up and cools as you can see in the images below. But on top of a normal seasonal up and down dynamic we’re seeing price growth slow too. In other words, prices just haven’t been rising as fast as they used to. When it comes to multiple offers, we’re seeing fewer these days compared to the past couple years. This is such a good point for sellers to understand. The market isn’t what it used to be. It’s still very competitive if you’re priced right, but it’s not like it was in the heyday of 2013.

3) Sellers, you might just get one offer: It’s easy to think everything is getting multiple offers, but it’s not true. When looking at thousands of current pendings, 59% of homes have only one offer while 20% have two offers. Thus 79% of properties in contract right now have two offers or fewer. My advice? Price realistically for today and you might get a couple offers. But you might only get one. Oh, and if you overprice you likely won’t get any offers at all.

4) It’s more aggressive at lower prices: This won’t come as a shock, but we’re seeing more multiple offers at lower price points. Here’s a look at multiple offers among current pendings as well as recent sales. Keep in mind there aren’t many sales and pendings above $700,000, so I wouldn’t put too much weight on these categories showing a higher percentage.

5) Many layers to the onion: Looking at multiple offers is just one way to see what the market is doing. The truth is there are many layers of the onion when it comes to real estate data, which is why I advise looking to many different metrics to understand the market. In other words, it’s not just about multiple offers to me (but this is cool to see).

QUESTIONS:

How did I get this data? A few years ago our MLS started including fields for “multiple offers” and “number of offers”. I’ve been watching these metrics and reporting on them for the past year or so, but today I’ve taken it to the next level. 

Is this data reliable? I’ve had a few people question whether this data is reliable. Of course data is only good as the input by real estate agents and hopefully the truth is being told. Do some people fudge the numbers? Probably. But keep in mind we’re looking at thousands of sales and pendings, so a few outliers won’t sway the trend. Moreover, the bulk of pendings actually show just one offer, which helps support the notion of agent honesty. 

I hope this was interesting or helpful.

RECESSION PRESENTATION: I keep getting asked about home prices and a looming recession, so I put together a quick presentation to download.

BEER & HOUSING CONVERSATION: Do you want to hang out at Yolo Brewing? On Saturday October 5th from 2-5pm I’m co-hosting a get-together. Hope to see you there. Details here.

Questions: What stands out to you most about the images above? What are you seeing with multiple offers these days? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

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Filed Under: Market Trends Tagged With: Appraisal, appraisals, Appraiser, cooling housing market, current market, Home Appraiser, Market Trends, multiple offers, pendings, sacramento housing market, Sacramento Real Estate, softening market, stats

Multiple offers & paying above the appraised value

April 4, 2018 By Ryan Lundquist 35 Comments

It’s getting a little crazy out there. Let’s talk about multiple offers and buyers paying above the appraised value. I want to give some perspective from the lens of an appraiser, and I’d love to hear your take. Any thoughts?

MULTIPLE OFFERS: The other day I heard about a property that had 20 offers and the contract price ended up being 16% above the list price. What the? Clearly the market was willing to pay more than the list price, so maybe the property was priced too low. Yet if the seller accepted the very highest offer, are there really comps and data to support a value that high? That’s always the question. Here are some things to keep in mind.

1) Magic: Appraisers aren’t magicians. They have to support the value they say exists. Sometimes appraisers are told, “There were 20 offers above list price,” and maybe that says something about value, but appraisers still have to use actual comps and adjustments in a report instead of the number of offers.

There are multiple offers above list price.
Are there multiple comps above list price?

2) Getting stuck on the list price: It’s important for appraisers to be cautious not to give too much weight to the list price because sometimes it really doesn’t reflect value at all. It might seem like a red flag for a property to be in contract 16% above the list price, but what if the property was priced 16% too low? Moreover, if the sales and pendings all support a value 16% higher, then it’s a no-brainer to see the appraisal come in at that level. But if nothing is anywhere close to the contract price, then maybe the property got bid up too high.

3) One Buyer vs everyone: There might be one buyer willing to pay more than anyone for whatever reason, but market value is about what the market will pay. If a bank is going to lend on a property, it’s a good bet to lend on market value rather than one individual buyer’s perception of value. 

4) Offering high: Let’s remember some buyers make offers based on the amount they are qualified to borrow rather than looking at the comps. This reminds us sometimes high offers don’t always mean value is there. 

5) Offers as data for appraisers: The number of offers can be helpful for appraisers. If we know there were 20 offers above list price and it looks like value is going to come in lower, then the number of offers can at least prod appraisers to dig deeper to understand value. In other words, if 20 buyers are willing to pay more, but I’m coming in lower, I better be ready to explain why. Appraisers can also use the number of offers as supplementary data. So an appraiser might write in a report, “I gave Comps 1-2 the most weight because they were most similar, and 10 of the 20 offers were at contract price or above, which also helps support the opinion of value.”

PAYING ABOVE THE APPRAISED VALUE: I’m hearing more from agents about contracts where the buyer says, “We’ll pay $10,000 above the appraised value.” This tends to happen in a market with low inventory and when buyers feel desperate about getting an offer accepted. Anyway, when I read a buyer is willing to pay above the appraised value, my gut reaction is to think the buyer probably believes the contract price is too high. Can you relate? Yet I’m paid to be objective, so I cannot let what a buyer wrote in a contract influence my conclusion of value. Besides, to be fair, contract verbiage like this might be about a buyer trying to get an offer accepted rather than what a buyer believes about value. Ultimately it’s crucial to remember support for value is found in the market with comps and data rather than what a buyer writes in a contract (this is why I recommend agents to communicate well with appraisers).

Radio Interview: By the way, I had a 35-minute conversation last week on a financial radio show. If you need some background noise, check it out here.

I hope that was interesting or helpful.

Questions: Anything else to add to the conversation? Did I miss something? I’d love to hear your take.

If you liked this post, subscribe by email (or RSS). Thanks for being here.

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Filed Under: Market Trends Tagged With: appaised value lower than contract price, bidding wars, data for appraiers, definition of market value, hitting the number, information to share with appraisers, Market Value, multiple offers, sacamento home appraisers

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