Homebuyers searching around Tahoe this spring are facing the frustrating reality that price is not price. On the contrary, the asking price of a home in today’s hot market is more like a starting point.
Once buyers get through the front door and have fallen in love with what they see, they often find themselves in competition with others who are swooning over the same property. In some cases, many others.
One three-bedroom cabin in Tahoe Donner received 18 offers the first week it was on the market, and closed for cash at more than $100,000 over asking (plus a generous sum for the used furniture). It backs to open space but doesn’t have a garage. And like many sales this year, it was priced more than $100,000 below where it would have appraised.
In some cases, the underpricing could be an error in calculating value in today’s rising market. In others, it’s a strategy to ensure maximum exposure and, perhaps, a bidding war.
If you know, for example, that 300 buyers on any given day are looking for a property at Lake Tahoe under $1 million, and you’re confident the home you intend to sell would appraise for at least $1.2 million, you might price it out the gate at $995,000 because that’s the price at which it will reach the highest number of buyers. The result is often a bidding war in which interested parties need to offer more than the asking price and may be forced to release all contingencies with their offer.
Strategic underpricing can be a boon for sellers, but the risk is that if the market were to turn, one might end up selling a home for less than it’s worth. Your realtor has to know the market well enough to accurately predict buyer behavior.
For buyers, it can be a frustrating journey filled with dashed hopes.
“For us, I would say it feels a little defeating, and like we have to be sitting on a pile of cash to realize our dreams,” said one buyer from Marin County who has lost out on four homes so far.
She and her husband are the prototype Tahoe buyer: solid, middle-class professionals with two kids, two dogs, and an RV. They can afford something over $1 million, but not by much. And they’re not cash buyers; they’re taking out a loan.
“You can’t go through the normal process and get a loan and compete,” she said. “It’s been frustrating and upsetting.”
Two-thirds of the homes that have changed hands in Tahoe/Truckee so far this year sold at or above the asking price. And the fiercest competition was for those homes priced under $1 million.
Among those that went for 5% or more over asking, the vast majority — almost 80% — hit the market at less than $1 million.
The same has been true at the ski areas, where three out of every four homes sold in 2021 to date closed at or above the asking price. One small two-bedroom cabin in Alpine Meadows, for example, reaped $800,000 — 28% above asking and $733/square foot.
Many of today’s buyers know they are overpaying; they are weighing money against lifestyle, choosing the latter.
“I can sit on the money, or I can start living my life,” said one Bay Area buyer who managed to out-compete more than a dozen buyers for a Truckee home.
That preference is also evident in the sales data.
In Tahoe/Truckee alone, more than 70 homes have sold so far this year for 5% or more above asking. Nearly all of those were at Lake Tahoe or in Tahoe Donner, a year-round resort community that offers swimming pools, a fitness center, golf, and a beach club/marina at Donner Lake.
Today’s buyers are not just looking for a house; they are looking for a lifestyle that includes amenities or easy access to all the outdoor recreation that the region has to offer.
The over-asking trend has been more prevalent in some markets, such as Tahoe Donner, than others. In Incline Village, for example, homes have been selling on average within 1% of asking price in 2021, and just half the sales there have been at or over asking.
Thanks to the tax advantages to those who can domicile in Nevada, and the fact that all three of its beaches are private for owners and their guests, Incline Village tends to be more expensive than the California side of the area. The median sales price in Incline so far this year is just under $2 million, compared to just under $1.2 million for Tahoe/Truckee (including the ski areas).
But even luxury homes saw upward bidding in Incline this spring. One home on Debra Lane, which is part of a lakefront enclave with its own private HOA beach and pier, fetched $14.35 million — $400,000 over its asking price — within just a month of being listed.
Today’s market is challenging for buyers, but not impossible. A good broker should be able to tell you what a property might appraise for, but that’s not really what it’s worth. And escalation clauses, which allow a buyer to outbid the next best offer up to a limit, are kind of useless right now; you are likely just to receive a counter back at the highest price you named.
For buyers looking to navigate this market, here is my advice: Consider what the home is really worth to you. A penny more is the price at which you would walk away from the home and feel confident in your decision.
Please call or email me if you would like a personalized valuation of your home or neighborhood. ~ Jackie Ginley (775) 391-9443; firstname.lastname@example.org