Valuation is Property Specific

Last quarter I wrote to you about the decline in sales volume in our local real estate market (detached homes over $450,000 in Albany, El Cerrito, Kensington, the hill areas of Berkeley and Oakland and Piedmont), in part due to the gap between the seller’s list price and the price buyers are willing to pay. This trend continued during the second quarter, with 293 homes sold, down 20% from the 365 homes sold in the same quarter last year. The median price for the current quarter fell to $745,000, down 9% from $820,000 in the prior year period.

 

Over the last three months, I had the opportunity to market seven different Oakland homes in excellent neighborhoods in a tight price range of $850,000 to $1,000,000. I met hundreds of potential buyers and listened to feedback on the desirable and undesirable characteristics of my listings, not only in comparison to the rest of the market, but also in comparison to each other. What I found fascinating was how different the foot traffic and interest level was for each home. After all, in theory, they should have competed with each other.

 

The process confirmed what I already suspected; buyers are starting their process on the internet.  They do their research, carefully eliminate those properties that don’t meet most of their criteria, and self select those properties that are worthy of a visit. Each shortcoming of a property eliminates some portion of the potential buyer pool. It is not unusual to find two homes in the same neighborhood and price range that are new to the market, but one receives fifty visitors to the open house and one receives twenty.

 

So what are these criteria that filter out the potential buyers of properties?

 

-         Location: Is the property close to the local neighborhood hub for schools and coffee? Is it on a quiet street? Is it a safe walk to school?

-         Condition: Does the home show well in relation to the expectation from the internet photos? Does it have deferred maintenance? 

-         Floorplan: What is the layout of the public areas and bedrooms?  Are the bedrooms all on one floor?  Does it have an attached garage with interior access?

-         Charm: Does the home have architectural interest/charm? 

-         Site: How is the home sited? Does it have a level-out backyard?  Is it level-in to the front door? Are there views? 

-         Neighborhood: What is the feel for the neighborhood? What do the neighboring homes look like?

 

The bottom line is that in this market, valuation is property specific. Gone are the days when buyers were willing to overlook certain property flaws with the expectation that near term appreciation would resolve the issues.   So if a seller must sell, he or she is forced to work with the only two things within his/her control: ensure that significant deferred maintenance is completed and find a price at which the property appeals to the broadest set of buyers.