Big Changes in the San Carlos Real Estate Market.

Old Habits.

The recipe for successfully listing and selling a home in San Carlos hasn't changed much since we emerged from the Great Recession, thanks to the decade-long economic juggernaut that the market has enjoyed.  This tried-and-true approach goes something like this:

1. Price the home slightly below market value to generate extra interest.
2. Set an offer date to review all offers at the same time.
3. Get multiple offers to compete and drive the sales price to a healthy premium over list.

This simplified summary of the process has essentially been the blueprint for how the local real estate market has operated, and both sellers and buyers have understood and conducted business by these rules for a long time.

But the new “COVID Economy” has  changed that playing field, and some of these rules no longer apply — at least while the market continues to struggle to emerge from the pandemic.

Three Key Changes.

Watching the economy and the local real estate market hit the brick wall on March 17th was unnerving for just about everyone, and it has injected a healthy dose of caution into what was a wide-open market up to that point.  This new caution has changed how many homes are priced and sold in the new economy.  This is how the “recipe” above has recently changed:

1. Transparent Pricing.  Pricing a home artificially low to generate additional interest (Step 1 above) has been a very successful tactic for listing agents in San Carlos, but has always been somewhat of a gamble.  If the listing doesn't get the anticipated premium above the asking price, it's difficult to go back and raise the price to a number that the seller wanted in the first place.  The risk of this happening is pretty low when the market is as red hot as it has been for the past decade, but it's very real when the market encounters a serious challenge like it is right now.  That's why many agents are now pricing their home transparently, or at a price more in line with what they anticipate (or hope) it will sell for.  This is especially true if the home has a characteristic that may make it unattractive to some buyers — i.e., a busy street, no yard, or less than stellar condition.  There are still homes, however, that can get away with the old tactic of pricing low.
2. No offer date.   Setting an offer date (Step 2 above) is also somewhat of a risky strategy, even in a strong market.  Making an eager buyer wait a week or longer to write an offer for the sole purpose of generating additional competition is now more risky than ever.  That's why you're seeing more agents taking offers “as they come“, instead of setting an offer date.  Last week alone, there were at least four listings that employed this strategy and sold within 5 days of hitting the market, and this week three others did exactly the same.
3. Smaller Premium Over List.  Whether it's a function of agents employing transparent pricing, or buyers simply not wanting to drive a bidding war into the stratosphere, sales prices are coming in much closer to the asking price — even in situations where there are multiple offers.  There are always the exceptions, of course.  Some homes that are either very desirable or very under-priced are still generating lots of offers and selling for impressive premiums, but this is happening with much less frequency than before the pandemic started. If you've been watching the stats lately in the Real Estate Week in Review, you've seen that more homes are actually selling below their original list price than at any time in recent memory.

What Does This Mean For You?

If you're shopping for a home in San Carlos, this schizophrenic market behavior adds a significant degree of difficulty for you.  How do you know if a home is under-priced, or if the agent has priced it “transparently”?  Will they take offers as they come, or will there be an offer date?

It's so critically important that buyers and their agents thoroughly understand the situation that they are stepping into when they decide to write an offer on a home in this market.  Since there are now a multitude of pricing strategies in play, knowing the true value of the home means the difference between potentially overpaying for a home, or simply losing out in a competitive bid.

Decisiveness is also paramount.  With more agents taking offers as they come, buyers and their agents need to be prepared and on top of the market on a daily basis.   Part of this preparation is to ensure that your finances are in order and you have an updated pre-approval letter ready to go.  And expect that you may need to mobilize on an offer within days of seeing it for the first time.

Whatever locale you are shopping for a home in, these changing circumstances make it more important than ever to work with an agent who is absolutely dialed into that particular market. It literally means the difference between winning and losing your dream home.