Does Your Realtor® Have a Formula – REDO?

I originally wrote this blog post in July of 2013.  I was amazed at that time how many homes were selling with multiple offers and the amounts being paid over the asking price.  Here we are 18 months later and it looks similar to the summer of 2013 all over again.  The good news is that the percentage of homes selling over the asking price is down quite a bit.  The bad news for buyers is that the prices have really jumped from the average sale prices of 2013 by quite a bit.

In Central Contra Costa, still considered one of the more affordable areas to buy a home, the average sales price for homes sold by city in 2014 are listed below.  Also, for the last 90 days of 2014, the percentage of homes sold over the asking price and the average amount over asking is listed.

Central to South Concord (towards the town of Clayton):
Average Sales Price – $564,789 (up 11% from a year ago)
Average Amount Over Asking – $13,871
Percentage of homes that sold over asking – 29.4% (60% in 7/2013)

Central to North Concord (towards Highway 4):
Average Sales Price – $423,657 (up 11.8% from a year ago)
Average Amount Over Asking – $18,652
Percentage of homes that sold over asking – 27.2% (60% in 7/2013)

Pleasant Hill:
Average Sales Price – $654,974 (up 13.9% from a year ago)
Average Amount Over Asking – $28,188
Percentage of homes that sold over asking – 40% (63% in 7/2013)

Martinez – North of Highway 4:
Average Sales Price – $445,331 (up 21% from a year ago)
Average Amount Over Asking – $15,317
Percentage of homes that sold over asking – 30% (50% in 7/2013)
Martinez – South of Highway 4:
Average Sales Price – $621,648 (up 18% from a year ago)
Average Amount Over Asking – $15,955
Percentage of homes that sold over asking – 31% (52.7% in 7/2013)

Walnut Creek:
Average Sales Price – $943,361 (up 11.6% from a year ago)
Average Amount Over Asking – $33,132
Percentage of homes that sold over asking – 39%

Even in the higher priced communities it’s a hot sellers’ market. Sales in the last 90 days reflect some phenomenal prices:

Danville:
Average Sales Price $1,184,104 in 2014 (up 13% from last year)
Average Amount over Asking – $49,793
Percentage of Homes that sold over asking last 90 days of 2014 – 35%

Lafayette:
Average Sale Price of $1,350,075 in 2014 (up 8.1% from last year)
Average Amount over Asking – $104,740
Percentage of Homes that sold over asking last 90 days of 2014 – 50.7%

With all of the odds stacked against today’s buyers, it’s INCREDIBLY IMPORTANT for your Realtor® to use a Formula to help you write a competitive and (hopefully) winning bid.

Based upon the home’s asking price, use one of the following:

a.     Asking Price – $200,000 to $400,000 – using a factor of $2,500 to $5,000 times the number of offers and adding that to the asking price. (Example: asking price of $400,000 and 5 offers.  Multiply $5,000 x 5 or $25,000.  Add $25,000 to $400,000 for an offer price of $425,000.)

b.     Asking Price – $500,000 to $800,000 – using a factor of $7,500 to $10,000 times the number of offers and adding that to the asking price. (Example; asking price of $750,000 and 9 offers.  Multiple $10,000 x 9 or $90,000.  Add $90,000 to $750,000 for an offer price of $840,000.)

c.     Asking Price – $900,000 to $2,000,000 – using a factor of $12,500 to $15,000 times the number of offers and adding that to the asking price. (Example; asking price of $1,850,000 and 7 offers.  Multiple $15,000 x 7 or $105,000.  Add $105,000 to $1,850,000 for an offer price of $1,955,000.)

Now that I discussed the simple math of the formula, there are a few other considerations.

First and foremost, your Realtor® should have a strategy to attempt to find you a home that does not require competitive bidding.  They should be talking to listing agents to attempt to find a home with that situation.

Next you have to be concerned about the property appraisal should you win the bid.  Many listing agents are requiring buyers to cover $10,000, $20,000 or more with additional funds, should the property appraisal fall short of the offer/contract price.  Some listing agents expect the winning bid to “WAIVE” the Appraisal Contingency.  I try to avoid recommending waiving the appraisal contingency.  However, I do perform a comparative market analysis of the subject property to establish a range of values for that home.  Then I can present to my clients the degree of (financial) pain, they can tolerate in the form of potential additional funds that must be added to their down payment for a winning bid and an appraisal less than the offer.

In rare cases if the appraisal contingency must be waived to get an offer accepted, I recommend my buyers do a “Pre-Offer Submission” appraisal which usually costs $500.

Now that you’ve read this, you can share this formula with your Realtor®.  Alternatively, you can select a Realtor® who has been using a formula and potentially other techniques to help their clients win the bid.

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