Overbidding Hits a Fever Pitch in San Carlos

March 14, 2014

I know, I know, I know… It was just last week that I spent an entire post telling you to basically ignore the asking price of a home for sale in San Carlos when you're formulating your strategy to write an offer.  And I still stand behind that assertion.  But at the outset of your home search, you obviously have to know the asking price of a home to understand whether it's even in your budget, because in this market just about everything  is selling for well over the asking price.   In the coming weeks,  you will continue to see some eye-popping premiums that are being paid for homes in San Carlos.  It's starting to resemble the over-bidding that's that has become commonplace in cities like Menlo Park and Palo Alto.

Just how high homes have been selling over asking price lately has been a hot topic in town.   Literally, the first question every buyer seems to ask when a new listing hits the market is “How far above the list price is this one going to go?” 

Below is a graph of the Sales Price to List Price ratio for the past three months of closed sales for single family residences in San Carlos.

San Carlos Overbidding

San Carlos: Percent Overbid on Recent Sales

Homes that closed escrow last month in San Carlos fetched an average of 15.2% above their asking price.   This is the highest average for any month that I could find in the MLS for the past 10 years!    And based on what we've been seeing so far for pending sales in February and March, this record probably won't last too long.

The Right Strategy?

Does this mean that you should just automatically add 15% to the asking price of any house that appears on the MLS?  Of course not.   As we discussed in the prior post, the listing price of a home is not usually an accurate assessment of the value of a home, and there's no magic formula for calculating what a list price should be.   You need to figure out on your own what the inherent value of a home is, based on its location, characteristics, and what other similar homes are selling for in this marketplace.

What this chart does tell you, though, is that home buyers in San Carlos are rolling up their sleeves and getting very aggressive in their bidding this year.   It should also put a dose of reality into buyers who are considering homes that are priced very close to their maximum budget.

In other words, if your absolute maximum budget for purchasing a house in San Carlos is $1.2M, you probably shouldn't be wasting your time looking at homes that are priced at $1.2M, or even slightly above.   The stats above seem to suggest that you won't even be close.

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