Do you follow Bay Area real estate? You’re here, so I’m guessing “yes” and we can assume you’ve heard about the house in Berkeley that just sold for $1 million over its asking price.
Let’s be clear; it didn’t sell for $1 million over. It sold for $1.15 million over. Twice its asking price, which has to be some kind of a record. It’s certainly being treated as one.
Two days after the deal closed the story hit local media, and then the national media — up to and including Sioux City, Iowa. Most of the stories have a “man bites dog” sort of quality to them, further proof of the wackiness that defines Bay Area real estate — amplified, if you can believe it, in the pandemic market.
Listed for $1.15 million, which already buys you a mansion in Sioux City, the home, known forever forward as The Home That Sold For $1 Million Over Asking, closed escrow at $2.3 million, which seems remarkable even after hearing its listing agent somewhat dazedly call it a “unicorn” and a series of nonplussed neighbors and real estate industry insiders explain how COVID has created this world where a backyard, a home office and a garage — even taken separately , forget about all of them in one package — will trigger a bidding frenzy. In this case, the frenzy didn’t stop until 29 offers were in. One of them was for twice the asking price.
It’s a satisfying explanation: market conditions plus once-in-a-lifetime value proposition equals record-setting sale. I’m not buying it, but it’s satisfying.
This was definitely an exceptional listing. It’s located on a quiet, almost rural cul-de-sac near Tilden Park. It’s got 2,448 square feet of turn-key living space including that all-important home office. The listing includes an empty adjacent lot that pushes the total footprint to .27 of an acre (11,000 square feet) and guarantees that nobody can build next door and block your view.
About that view.
It’s amazing. Stupendous. Once-in-a-lifetime. San Francisco, the Bay, maybe three bridges, and unblockable. It’s the best view in the area. Metaphorically it’s worth a million dollars. Is the home worth $2.3 million, though?
Well, yeah, something close to that; definitely worth a whole lot more than $1.15 million, and here’s why:
In a perfect world, Realtors arrive at asking prices by studying recent sales of similar nearby properties: “comps.” Unfortunately for these sellers, this home has no comps.
Sales in this neighborhood are uncommon; only six since 2018, a much longer period of time than Realtors like to use when determining comps. None of those six sales measured up to the one sold last week. They were too small, or their lots were too small, or they had partial (or non-existent) views. Still, all but one sold for more than $1.15 million and that one was half the size of last week’s sale, on a postage stamp-sized lot. Not a comp.
We can still figure out what this place is worth, though; if we take only the sales with views (partial or otherwise), we get an average sale price per square foot of $735, which we can then multiply by 2,448 (square feet of last week’s sale). What do we get? $1.8 million. We’re getting close, but we still need to figure out the value of an extra 5,000 square feet of land.
Fortunately, a nearby active land listing — 5,000 square feet with “filtered” views” — does the trick. Add in its $350,000 asking price and we’re at $2.15 million, making $2.3 million a not-unusual closing price and eliminating the need for a nationwide media blitz.
So the question isn’t “who’d pay twice asking” but instead “who’d list their home for half its value?” Weren’t they taking a huge risk?
Actually, no. It probably took a pretty good pitch from their agent, but the fundamentals are sound. They make you want to douse yourself in bleach, but they are sound.
See, in an overheated, under-inventoried market, home offices and even killer views aren’t enough. You’ve got get people through the front door. Insane bargains are probably too good to be true, but you’ve got to go see, right?
A few of the 29 offers received were probably for a few hundred thousand more than $1.15 million, but those were from naive buyers and agents. In general, I’m guessing every experienced agent that went through this listing knew it was worth at least $2 million and told their clients to ignore the asking price. Replace what you’ve read with this reality and what’s left is a tale about a house that sold for a little bit more than it was worth, and real estate agent who figured out how to get a ton of free publicity.
Larry Rosen is a San Francisco-based writer, editor, podcaster and recovering former Realtor. He is a guest columnist and his viewpoint is not necessarily that of the Examiner. The Market Musings real estate column appears every other week.