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July 27, 2010

Pie-in-the-Sky Pricing Not Working in 2010

There was a time when sellers could say, “I’ll sell my house if I can get [insert crazy price here],” and buyers would pay it. Perhaps these buyers had gotten caught up in the housing boom, weren’t consulting comprehensive pricing sources, or were working with an out-of-area agent who was equally misinformed. It was all very pie-in-the-sky, and sellers benefitted immensely from the proceedings.

Flash forward to 2010, and this sort of thing isn’t happening anymore. It just doesn’t work to put a nutty price on your home, inconvenience yourself with keeping things neat and clean for showings and open houses, and run your agent back and forth in the hopes of finding a buyer who’ll pay your unrealistic asking price.

Case in point—1356 Dolores in Noe Valley, a modest home that sold in 2006 for $995,000, and which was remodeled by its current owners. They spent a reported $150,000 converting the basement to a bedroom/bath/study; remodeling the kitchen, bath and dining area and a few other miscellaneous items. We then had a major real estate blowout that took hold in 2008 and got worse from there. Prices dropped citywide.

So it was a little surprising to see 1356 Dolores—located on a busy downhill stretch a few doors from the Cesar Chavez/Dolores intersection—come on the market in May for $1,649,000. This price is usually reserved for homes located in better parts of Noe Valley. The property was beautifully remodeled, and had a nicely landscaped yard. But for one thing, there was no bathroom for the two bedrooms to share on the upper level. And the whizzing car factor along Dolores wasn’t going away, meaning buyers concerned with child or pet safety concerns were likely to shy away. Even the Zillow “zestimate” pegged the property at $1,280,000, which is probably still too high, given the aforementioned issues.

The owners of the property were not alone; since April 1st, a total of 261 houses and 461 condos/TICs have been withdrawn from the market. I haven’t cross referenced these homes to see if they’re back on the market at lower prices. In some cases, they are. But mostly, they belong to disappointed—and now, educated—sellers who are slowly coming to terms with the new San Francisco market.

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