Home Buying in Palo Alto>Question Details

Douglass Mcn…, Home Buyer in Palo Alto, CA

Price increase after sitting on the market for 2 months?

Asked by Douglass Mcneil, Palo Alto, CA Mon Nov 11, 2013

Why would someone increase the price after the property has been sitting on the market for a long time? Example: 3396 Park Blvd.

http://www.trulia.com/property/30941261-3396-Park-Blvd-Palo-…

DOM = 63 days on the market (as of 11/11)...which is an eternity for Palo Alto in this market.

Presumably because it is overpriced? Yet, we see a price increase?

Why do people do this?

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Answers

18
Richard Littlefield’s answer
You would have to ask them. If they had priced the property to sell without doing a certain repair and finding they can not sell it without doing the repair that could be one reason.

My guess is that they might have been getting offers they felt were too low and so think that raising the price will fix that. More likely they we only get fewer offers.

But I can only guess.
0 votes Thank Flag Link Wed Nov 13, 2013
If you look at the average house sold in the Ventura neighborhood you will see that it is most often down around 1200 sf. The largest house sold in the neighborhood during 2013 was Chestnut which was 1870 sf. vs. 2021 for Park. The average size for the fifteen homes sold in 2013 was 1308 sf. The small average house size is the main reason for the low prices.

If you look at the average price per sq ft, then the Ventura neighborhood looks very good, hitting over $1,000 per sf.

So yes, during 2013 Park Blvd was larger and more expensive than any of the other homes sold or offered for sale in the neighborhood. When people looked at Park then Chestnut it is easy to pick the less expensive house as a "safer" purchase. Park's size and price helped Chestnut to sell.

The average lot size of a home sold in Ventura (~6000sf) is smaller than Palo Alto (~8000sf) or the South Palo Alto neighborhood (~7500). The lot size limits how big of a house can be built. Most of the local builders can maximize their profits by building big houses. They've targeted neighborhoods with larger lots. Ventura has had a lower percentage of knock-down, rebuild construction producing large new homes. The average single family house sold in Palo Alto has climbed from very roughly from 1700 sf in 1998 to 2200 in 2013. The increase is due to knock down rebuild. Ventura has not yet had its turn.

Looking at just price per sq ft can be misleading but looking at only the average price of a neighborhood with an average 1308 sf house size and comparing it to a city with an average house size of 2200 is worse.

If you want to have some more fun take a look at 3370 Park Blvd (which did not sell) and compare it to 201 Chestnut which did sell. They are the same house; perhaps someone was worried about DOM or a description which says built in 1928.

3396 Park Blvd is a gorgeous home built in 2006.
http://julianalee.com/homes/2013/park_blvd_3396/home-for-sale.htm

There are currently 19 homes for sale in Palo Alto. The lowest priced home is 1,027 sf priced at $1.15M. Next lowest is 1,948 sf priced at $1.78. Third is 1,889 sf priced at $1.8M. Fourth is the gorgeous 3396 Park Blvd with 2,021 sf priced at $1.8M

Home values for Palo Alto neighborhoods can be reached from
http://julianalee.com/palo-alto/palo-alto-statistics.htm

Juliana Lee
Top 2 agent nationwide at Keller Williams Realty, the nations largest
Cell 650.857.1000
juliana@silicon-valley-homes-for-sale.com

Over 20 years experience
Over 1,000 homes sold in Santa Clara County and San Mateo County
.
Web Reference: http://julianalee.com
1 vote Thank Flag Link Wed Nov 13, 2013
Juliana - Interesting. I didn't know 3370 Park and 201 Chestnut were the same house. But doesn't this support the argument that 3396 Park is overpriced? 3370/201 Listed at $1.78M. Sat for 45 days. Re-listed at 1.5M and was in contract 2-weeks later (at a sales price only 5% above the 1.5M ask)?
Flag Wed Nov 13, 2013
Forgot to mention that Terri brought up the 1,800,000 issue. When buyers search for homes they often enter even numbers in their search. It isn't common but I've found good homes for my clients (that were priced just below a round number) that my client wasn't aware of through their own searches.
Flag Wed Nov 13, 2013
I am the listing agent for this property. There have been quite good offers made to purchase it. Good offers have been turned down.

When holding a house open the first question many visitors ask is "how long has it been for sale?" Yes, it is not a marketing plus for a home to be on the market very long but when a real buyer makes an offer to purchase a home they are comparing it to other homes they can buy whether it has been on the market for a short period or a long period.

This morning there are 19 single family homes for sale in Palo Alto. The least expensive home is a 1,027 sf home, the second least expensive home is $1.78M.

There was a nice smaller nearby vacant home "offered" for sale at a significantly lower price. This other home sold well over list price in a reasonably short period. Prospective buyers no longer "compare" it to a low price nearby nor anywhere in Palo Alto for a roughly similarly sized home.

This isn't the first time I've shown a seller what other homes are offered for sale and the seller decided to raise the price a little sending a clear message "don't wait for a price reduction."

The assumption made when looking at DOM is that the seller is committed to sell. In Palo Alto and many other areas, the sale is motivated by investment decisions. This gorgeous home is offered at a good price and the seller is realistic but not under any pressure to sell.

http://julianalee.com/homes/2013/park_blvd_3396/home-for-sale.htm

Again look at the sales prices of homes in Palo Alto
http://julianalee.com/palo-alto/palo-alto-statistics.htm
Prices are going up.

Juliana Lee
Top 2 agent nationwide at Keller Williams Realty, the nations largest
Cell 650.857.1000
juliana@silicon-valley-homes-for-sale.com

Over 20 years experience
Over 1,000 homes sold in Santa Clara County and San Mateo County
.
Web Reference: http://julianalee.com
1 vote Thank Flag Link Tue Nov 12, 2013
What you don't see are the offers that were made to purchase the home ... Don't assume the original price was too high. Homeowners can change their mind, wanting more, and getting more.

Perhaps you didn't notice there was a nearby competing home a block away which has sold, leaving less competition. There are 20 single family homes currently for sale in Palo Alto. Only one of them is priced significantly below 3396 Park Blvd.

Take a look at monthly Palo Alto home prices http://julianalee.com/palo-alto/palo-alto-statistics.htm Prices are still rising. Look at sales price vs. list price. The average sales price is showing no downward drop towards the list price.

Yes, when a homeowner decides he wants more money it can be a gamble but do you expect very many more homes to be offered for sale in the next couple months? Buyers can and have looked at days on market waiting for a price drop only to pay even more.

The home is gorgeous http://julianalee.com/homes/2013/park_blvd_3396/home-for-sale.htm

Juliana Lee
Top 2 agent nationwide at Keller Williams Realty, the nations largest
Cell 650.857.1000
juliana@silicon-valley-homes-for-sale.com

Over 20 years experience
Over 1,000 homes sold in Santa Clara County and San Mateo County
.
Web Reference: http://julianalee.com
1 vote Thank Flag Link Tue Nov 12, 2013
Personally it doesn't really seem overpriced for what it is & the increase you mention is less than 3% from the previous price which is really a negligible amount so is very likely marketing related.

In this market were we are still seeing increases in prices (as everyone is noting: there is very little inventory), if the seller is in no hurry to sell (maybe because they want a contingency to find & purchase their next home, or has no need to sell, or many other reasons) seeing a price increase on their property which has been sitting is not unheard of nor is their selling at or above the new higher price.

If you are interested in the property & you feel after looking at the current comparables that the property is not worth their new or even their old list price go ahead and offer less. If the sellers declines your offer, you can always resubmit another offer and in the meantime new properties are constantly coming on the market.
1 vote Thank Flag Link Mon Nov 11, 2013
It could be that they did improvements or made repairs. Or that they decided to move it up to a different price point for buyers shopping for homes above $1,800,000.

You can try contacting the listing agent and ask her yourself.
1 vote Thank Flag Link Mon Nov 11, 2013
Douglas, you are still thinking average sales price and thinking there is something wrong with the Ventura neighborhood. The Ventura neighborhood is a GOOD neighborhood! The average lot size is a little smaller than many other neighborhoods so builders have not built as many new 3000 sf houses which have pushed up average house prices in neighborhoods such as the South Palo Alto neighborhood. The Ventura neighborhood is a GOOD neighborhood whose average house size is significantly smaller than the average house sold in Palo Alto.

The most important thing is that REAL buyers visit homes and compare them to each other. 3396 Park Blvd is a gorgeous fairly new home and compares very favorably with the other homes that are for sale. A REAL buyer will compare them.

The DOM number is a small issue but it is a real issue. When REAL buyers are fatigued or running out of time they may not look at homes which have a high DOM. When REAL buyers are in their prime condition they will know every house that is for sale in their price range. Palo Alto isn't very big.

A real issue with a home such as the gorgeous 3396 Park Blvd is that it is one of the best houses in the neighborhood. Buyers are cautious about buying the best house in a neighborhood, sometimes preferring to buy an average house in a neighborhood with a higher average price. I had a buyer buy a very small not particularly good home because the mailing address said Atherton.

The Ventura neighborhood could be at the beginning or a knockdown - expand period. The group of lowest priced houses in Palo Alto is the Ventura neighborhood because they have NOT ALREADY REBUILT. If we had not gone through the downturn in 2008, Ventura may have already begun a building craze.

When holding an open house it is not unusual for a visitor to compare the listed price to a computer/statistics generated price from either Trulia or Zillow. Their comments can immediately show that they are not REAL buyers. A buyer who has made offers, had them rejected for being too low, compares houses to houses.

Emotion can interfere at the last moment.

I've also changed the address of a house I was selling. You will see some buildings which do not have a 13th floor. I had a home for sale which had a house number often associated with bad things to Chinese people. I got the City of Palo Alto to change the number.

Yes there are marketing tricks to catch the attention of buyers, changes made to avoid emotions, and many other things that need to be done to make sure I sell every home at a good price for my seller. We are entering a period when the average DOM increases. Prices do not drop even though we are entering a seasonal period of higher average DOM. Don't mis-read the tea leaves.

If you are focused on statistics, look at the Old Palo Alto neighborhood. Its average square foot sales price is probably the highest in Palo Alto. Crescent Park which also has a reputation as being one of the highest priced neighborhoods also has a high square foot price. People will pay a premium price to live near other wealthy successful people but the main reason for the higher average house sales price is the LARGER average house size. Palo Alto is small. There are differences between values in neighborhoods but the differences are much smaller than the differences in the average house such as size.

3396 Park Blvd is a newer gorgeous home offered for sale at a competitive price and is located in a good neighborhood whose average house size is less than the average house size in Palo Alto. It is not a 3000 sf McMansion.
http://julianalee.com/homes/2013/park_blvd_3396/home-for-sale.htm
It is located near the California Ave shopping district which is remodeling.

Don't ignore average home size when looking at average sales price.
Web Reference: http://julianalee.com
0 votes Thank Flag Link Wed Nov 13, 2013
Contact the listing agent or ask your buyer's agent if the know why. The few times I have seen that is because the homeowner made recent improvements. For instance, they may had negative feedback that the needs a new roof. Well, they may have decided to replace the roof and in turn ask for more money because of the improvement. Or they may have finished the basement, remodeled the kitchen/baths, the list can go on and on......
0 votes Thank Flag Link Wed Nov 13, 2013
Douglas,
You are asking the WRONG question.
The right question is "Why didn't you make an offer at the lower price?"
The truthful answer to that question, places the proper validity to your 'why?' question.
-
There are many, many, many reasons that could be associated with the increase. Some are 'black hat' others are strategy, and even others could be related to material improvements while the least desireable is the seller has grown weary and elected to raise the price...just for the fun of it.
-
I have raised prices on homes that did not sell via other agents. The other agents drank the Kool-Aid and thought real buyers and sellers frequent places like Trulia and Zillow. THEY DO NOT!
-
REAL BUYERS AND SELLER use the MLS. It is important to know the difference. It is more important to the home onwer that their REALTOR knows the different.
-
It matters not what your understanding of real estate is, it only matters that the valuing process of REAL BUYER is understood and anticipated. Pricing BELOW their value bracket can backfire.
-
Why do people do this? Who knows? All I can share is why I have elected to advise some of my sellers to 'Raise the Price."
-
So, why did you not make a offer while the price was lower?
Answer: "Perhaps you were working from a FALSE set of data."

Best of success,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor FL
727.420.4041
Move to the Front of the Line
(http://FirstLookHomes.us)
0 votes Thank Flag Link Wed Nov 13, 2013
There is no "Cardinal rule" that says sellers and their agents can't increase their initial asking price of a home. In many cases this is done after the seller finds there is work that needs to be done on the property in order to make it sellable. New appliances, roof replacement, painting, HVAC work etc. are but a few bigger ticket items that often contribute to sellers increasing their "asking prices."

Regards,

Bill
0 votes Thank Flag Link Wed Nov 13, 2013
Douglass you would make a great real estate agent

Marcy Moyer
Keller Williams REalty Palo Alto
marcy@marcymoyer.com
650-619-9285
Cal BRE 01191194
Web Reference: http://www.marcymoyer.com
0 votes Thank Flag Link Tue Nov 12, 2013
Thanks Marcy. But not sure about that! I am just a potential buyer that spends way too much time analyzing the data. Hasn't gotten me very far :( I'd rather be sitting in a new home and ignoring the market altogether.
Flag Tue Nov 12, 2013
IMHO, I it's priced a too high.

Nothing in Ventura sells this high. If you go back 6-months, 9 properties have sold in Ventura with a price range of $975K - $1.58M.

201 Chestnut (closed 11/8) might be the best comparable. It listed for $1.5M and sold for slightly higher at $1.58M. 5% above ask isn't that significant. Slightly smaller SF (1870 SF vs. 2021 SF). But has 4BR (vs. 3 BR for 3396 Park). It has a bigger lot (5684 vs. 4891 for 3396 Park). And 201 Chestnut was completely remodeled (though 3396 seems to have some nice finishes as well).

http://www.redfin.com/CA/Palo-Alto/3370-Park-Blvd-94306/home…

Then again, this is Palo Alto...you never know. A buyer could come along and pay all-case well above ask. Good luck.
0 votes Thank Flag Link Tue Nov 12, 2013
Interesting perspectives.

Let me share my perspective as a potential home buyer:

I see a property with DOM > 2 months, I think the property is over-priced, something is wrong with it, etc.

If I am interested in the property, I would consider coming in with an offer below ask (which I would not normally do in this market). Not a low ball offer per se, but definitely below ask.

I now see the seller raising the price. I will stay away from the property.
0 votes Thank Flag Link Tue Nov 12, 2013
Fair. But if you want to win, you need to 'play to win'. Can't just show up to play. On the peninsula, this simply doesn't fly.
Flag Wed Nov 13, 2013
All I can say: you can't win if you don't play.
Flag Wed Nov 13, 2013
Pretty straightforward: i am interested in the home at a certain price point (lower than the original list price). i stay away because the seller has clearly communicated to me that they will not sell at my desired price point.
Flag Tue Nov 12, 2013
Why stay away? It would make no sense not to make an offer on a property you want ~unless you really weren't that interested by the property to begin with.

When you make an offer it doesn't matter if a property is overpriced or under-priced because buyers (a.k.a. 'the market') will only offer what they feel a property is worth (this is why some buyers will go in with offers over asking) and buyers typically get an inspection period to see if 'something is wrong with it' (and if there is: you can negotiate to correct, accept it, or walk away). Now the seller's motivation and needs will determine whether they accept the offer or not but you won't know their answer until you either submit your offer or wait to see what it closes at with another buyer (which will be sad if it closes for a price you would have been willing to pay).
Flag Tue Nov 12, 2013
You've been offered a number of great explanations by other agents. The price increase could be anything

I don't know if this is a short sale....but once lenders have approved them, the price also increases....
0 votes Thank Flag Link Tue Nov 12, 2013
Doug,

I think Marcy has a great answer. The seller likely wanted a certain price and agreed to a list price "under" the desired as a "strategy" and it did not work. Perhaps they even got an offer close to the asking (or not) and the seller was offended because he felt he would have received multiple offers, etc. So the increase could be a message to the buying community of a price they would sell. It might sound crazy but this does happy even in a very strong sellers market in Palo Alto.

Sincerely,

Gretchen Swall
0 votes Thank Flag Link Mon Nov 11, 2013
Well, sometimes you need to increase the price in order to drop the price... It's a marketing strategy. Also, every time the price id being changed the listing gets a bump in automatic searches.

If you are looking to buy this home, the price change should not affect your strategy - go write an offer for what you think it's worth and start negotiating!
Web Reference: http://talisrealestate.com
0 votes Thank Flag Link Mon Nov 11, 2013
Douglass,
Ultimately it the seller who decides what the price is to be on a listing. That seller may or may not listen to the advice of their agent or the feedback of buyers.

In Palo Alto you are right, 63 days on the market mean there is a problem, especially when there are only a total of 20 homes on the market. Ultimately it means the home is priced too high for the location, condition, or size.

However, don't blame the agent. It is probably a seller who thought the price was too low to begin with but was expecting multiple offers with an over list price sale. When this did not happen the seller probably decided he/she would list at the price that was desired and holf off till someone came along who is willing to pay it.

Marcy Moyer
Keller Williams Realty Palo Alto
marcy@marcymoyer.com
CAL BRE 01191194
650-619-9285
Web Reference: http://www.marcymoyer.com
0 votes Thank Flag Link Mon Nov 11, 2013
Ask the Listing Agent if he 'double-ends' in his business practice.
0 votes Thank Flag Link Mon Nov 11, 2013
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