By Paul Hagey
Home Truths, a quarterly report on the state of the Berkeley real estate market, is brought to you by Red Oak Realty.
Selling your Berkeley home isn’t as straightforward as it used to be. Red Oak Realty agents are reporting that Berkeley listings are receiving fewer offers and bidding wars are waning, suggesting a possible housing peak.
Over the past decade, Berkeley homeowners — just like those everywhere in the Bay Area — have weathered a nausea-inducing housing market roller-coaster ride that may delight kids who visit Six Flags Discovery Kingdom this summer, but no-one else.
Five years ago, even those who wanted to sell, or were curious about the prospect, took one look at their obliterated equity and froze. More recently, the city has experienced dizzying double-digit growth.
This year, while the median sale price and median price per square foot of Berkeley single-family homes are both up in the first five months of 2016 from a year ago — $1,100,000 from $1,050,000 —the number of sales are down 18% from 182 to 150, according to MLS data analyzed by Red Oak Realty.
Homes are also sitting on the market longer. Berkeley homes took an average of 22 days to sell in the first five months of 2016, two days longer than the same period in 2015.
Berkeley market stats that suggest a slowdown:
- Berkeley saw 150 single-family home sales through May, an 18% dip from the same period in 2015.
- Berkeley homes took an average of 22 days to sell January through May 2016, two days longer than the same period a year ago.
- As more buyers are priced out of single-family homes, demand for Berkeley condos has shot up, another indication of a possible housing market cooling. Through May 2016, condo prices are up 29% above the same period in 2015 and fetching an average of 17% above list price.
While Berkeley listings continue to fetch many offers and sell for impressive amounts over asking price, some haven’t received any offers by their set offer dates, something Red Oak Realty agent Patrick Leaper said hasn’t happened for properties of similar conditions in recent years. For those homeowners waiting for the market to crest before selling — their ride may be ready.
As the market appears to be slowing, here’s what you need to know about getting your home sold. And, as you’ll see, selling is not as straightforward as you may think.
In some cases it’s counter-intuitive. For those warming to the idea or just curious about the process, the recent sale of the five-bedroom, three-bath, 3,500-square-foot (approximate) Berkeley estate at 660 Spruce Street (listed by Leaper) provides some valuable insights sellers can adopt to achieve a smooth, successful sale.
Good agents, like those at Red Oak Realty, are a critical component to a positive selling experience. Here’s what they recommend homeowners should keep in mind.
(It’s important to note that the Berkeley market has experienced up-and-down real-estate cycles for decades. Red Oak Realty expects this apparent transition to be relatively mild — more of a normalization, not a crash.)
Berkeley peak selling season occurs in March, April and May — as well as the fall, particularly September and October.
To get top dollar, make sure to hit these windows. (There are cases where off-season sales can generate a premium return — this is something to consult with a good agent about.)
Leaper and his sellers rushed to get 660 Spruce St. ready for an April listing. The home sold on May 10 for $2.45 million, 22.8% over the $1.995 million list price.
Know the competition
“Buyers will be comparing your home with what else is on the market,” Leaper said.
Consider the condition, style and pricing of other Berkeley listings and compare them to your home’s. Be ready to price relative to the other listings.
Leaper felt 660 Spruce St. was the strongest of the two other similar homes on the market at the time, and he and the homeowners priced the home accordingly. “We looked sweet in comparison,” he said.
Invest in a spruce-up
Sellers poured $75,000 into 660 Spruce St., which had fallen into disrepair.
They finished all the floors, painted the whole house, installed new light fixtures, and performed a $27,000 kitchen remodel featuring a Spanish tile floor, Carrara marble countertops and new appliances. They also got bids for repairing the roof, foundation and electric system.
Without that investment, Leaper estimates the home would have fetched approximately $300,000 less than it did.
Homeowners should perform a basic spruce-up before a sale to raise their price ceiling:
- Clean up the landscaping
- Make interior lighting consistent
- Shine up all surfaces: floors, ceilings and walls
Understand your home’s style, condition and location
Style, condition and location are the three golden factors of a home sale. A home with all three will do extremely well.
Nothing can be done about latter, but investments in improving condition and style, as noted above, typically generate a healthy return.
Right now, a listing needs all three factors to achieve a home run sale: style, condition and location.
It’s tempting to price your home at or above what you think it’s worth.
That’s a mistake. Not overpricing is one of the most important things sellers can do to ensure they got top dollar.
Three things happen if a home is overpriced:
- The real-estate community ignores the listing, advising their buyer clients to look elsewhere.
- Potential buyers don’t see value, dampening interest. It distracts them to other possibilities, whether it be to comparable homes or to hold off on buying altogether.
- Bidding wars that up the sale price become less likely as you typically have less enamored buyers.
Leaper’s seller wanted to fetch $2.5 million for 660 Spruce St. and wanted to price the home accordingly.
He strongly suggested they list at $1.995 million to stoke buyer interest and increase the chance for competing offers. They went with Leaper’s suggestion, which proved fruitful.
Initial offers came in around $2.2 million and then competition pushed the sale price up to $2.45 million, close to the seller’s target.
While the market is headed for its seasonal slowdown for the summer, Red Oak expects it will spike again during the fall. How values will fare in comparison to previous years, and whether this is the true start of a slowdown, remains to be seen.
Home Truths is written and sponsored by Red Oak Realty, one of the largest independent real estate brokers in the East Bay, serving the community since 1976. Read more in this series. If you are interested in learning more about the local real estate market, or are considering buying or selling a home, contact Red Oak at firstname.lastname@example.org, tel: 510-250 8780.