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I recently sold my home in Austin. I could've easily employed a multiple offer situation like my realtor was pressing me to do in order to score more money. But I was more interested in making sure whomever moved into my home would be a good citizen b/c I built solid relationships with my neighbors over the years. In other words, I valued who was moving into my home just as much as the money I would receive. I made good money off my home relative to what I paid. But I didn't ask for more than what I placed it on the market for. I suppose this is considered fair market value though my realtor would've preferred to pursue a bidding war which drives up fair market value in the entire community b/c people are paying above and beyond the list price.
Perhaps my employment, other assets, and simple lifestyle doesn't make me as desperate to sell at a higher price than others. I just recognize that a home should be affordable. So if everyone is looking to cash in as much as possible, how can anyone, particularly the next generation, afford a home?
If you bought a house 10 years ago for $200k, then wanted to sell today and saw comps are going for $600k what would you do? Would you be willing to list your own house at far below market because that's the fair and honorable thing to do? How would you decide what a reasonable price is?
The seller does not control what buyers will do, if they submit 30 offers in 1 hour, if they are in a frenzy to offer $50k over asking. I'm not sure what a seller is supposed to do except for list a house at a price inline with recent comps, and accept the best offer that comes in?
I wouldn't sell at $600k b/c I know the valuations are out of control and the people who can afford to pay that much are not my neighbors. I want my home to be affordable. $600k is not affordable for the majority of Americans. And I live in a community that reflects much of America...not just one segment of it. But I'm just speaking for myself. I can comfortably say that I am not adding to this unaffordability housing crisis.
As for how I would decide, I can't say for sure. Maybe stop in the middle and list for $400k? But this is just me with my middle-class cap on trying to preserve what's left of people like me who are being squeezed both ways. The middle-class can't survive if we all we're doing is referring to comps developed by the RE industry who exists to cash in as much as possible on housing. There should be other factors at play, like the neighborhood demographic and average area household income, that should be part of the pricing decision. At least, that's what is what for me when I was selling my home.
Your Realtor desired a bidding war because the higher the sale price, the higher his take. Also, securing a sale well above asking is an effective marketing tool for his services.
Exactly...and it drives up the comps and fair market value. FMV is not so fair when the realtor's commission is built into that metric.
They have something here called "Prop 13" it was voted in many many years ago and long story on that is that when you buy you property you lock in your tax rate tied to the value of the place at the time of purchase. You of course get some yearly inflation increases but it's not tied to the current market value of the place.
It saved many many people lots and lots of money over the years. They have been chipping away at that here for the last 20 years or so. The politicians would just love to get get rid of that. They put up propositions and proposals every election season with carefully deceptively worded language that is designed to mislead people into voting down the original prop 13.
A caveat to that is if you do any kind of renovations and have to have a permit pulled, you are hosed, you get reassessed at the current market value and BAM, you've tripled or quadrupled your tax bill depending on how the numbers shake out of course.
I've got a buddy that happened to him. He did some reno work on his place, they pulled a permit and his tax bill went from like 3k a year to 15k I think he said it was. He bought a long time ago and the property value went through the roof.
Have friends in Newport Beach on the water. They have owned a rather drab home for 35 years. Their property taxes are a pittance, despite the jaw dropping value of the property. They assume whomever buys their place down the road will tear it down, build a trophy home and not blink at the reassessed value/ property taxes.
I wish we had something like that here. The rise in property taxes used to be obscene, until we implemented a 2% cap on increases. But towns find ways to get around those caps. And the cap didn't lower the, already crazy, property taxes. It just slowed the rate that they rise. Plus, each town is required to do a reval every 10 years, which sometimes helps some properties, while hurting others. A million dollar house here has property taxes from 20k-40k per year, depending on the town. And like California, a million dollar house isn't anything special around here.
For kicks, I continue to keep tabs on all my former homes. The property taxes on my former Montclair home are closing in on $30,000.
Despite the tax situation, it’s a hot market because there are more ready, willing and able buyers than homes for sale.
I wouldn't sell at $600k b/c I know the valuations are out of control and the people who can afford to pay that much are not my neighbors. I want my home to be affordable. $600k is not affordable for the majority of Americans. And I live in a community that reflects much of America...not just one segment of it. But I'm just speaking for myself. I can comfortably say that I am not adding to this unaffordability housing crisis.
As for how I would decide, I can't say for sure. Maybe stop in the middle and list for $400k? But this is just me with my middle-class cap on trying to preserve what's left of people like me who are being squeezed both ways. The middle-class can't survive if we all we're doing is referring to comps developed by the RE industry who exists to cash in as much as possible on housing. There should be other factors at play, like the neighborhood demographic and average area household income, that should be part of the pricing decision. At least, that's what is what for me when I was selling my home.
Where do you live?
If you decide to sell, I’m probably just a short flight away.
For kicks, I continue to keep tabs on all my former homes. The property taxes on my former Montclair home are closing in on $30,000.
Despite the tax situation, it’s a hot market because there are more ready, willing and able buyers than homes for sale.
Montclair taxes are some of the worst. Montclair is one of the towns I don’t even bother looking in for rental properties. You can’t make any profit on rent with taxes that high.
As far as a family home? Montclair is weird. It stagnates for a long time, then has a huge jump in prices. Then stagnates and then another huge jump. Montclair has always been popular for NYC transplants. Especially the more artsy ones. So when COVID hit, Montclair home prices shot up. My friend had 2 homes on his street that sat there for sale for over a year. Now, after COVID they doubled in value. I’m kicking myself for not buying one of them and flipping it now.
But yes, the property taxes are prohibitive. Since it is a very liberal town I don’t think they care. But taxes on a $1M home would be around $35k there.
I live in the Boston area and I often wonder how people afford what they do. I've saved and worked hard and my DH and i were able to buy a nice home in a nice town with good schools in our 40s. I see other people in their 30s dropping 1.5 million on homes in towns with even better schools (and sending their kids to private) like it's nothing. Either they have really good salaries or their parents are giving them money. More often than not it's their parents.
No shortage of very well educated people earning very good money in Boston metro.
Very well educated people earning very good money are more likely to marry other well educated people earning very good money.
This is a great thread. And this is a profound question - how ARE people paying for these homes?
I think the combination of the US government printing a whole lot of money that the banks are using at near-zero risk (interest rates ~ 1%) AND accounting gimmicks that lenders are doing to prop up people's income are enabling people to borrow massive sums of money.
Of course, generational wealth is having a huge impact here as the older generation are able to sell their properties at multiples far beyond what they paid for it 50+ years ago. So goes the wealth gap.
I think a similar-interesting question is: why is the middle-class committing "hara-kiri" upon itself? We talk about greedy CEOs, and the middle-class being squeezed by greed (rich) and handouts (poor). Yet, the middle-class is actively participating at bankrupting a lot of people by selling their homes at extreme multiples over the asking price. Multiple bids, best and final offer, and other sell tactics to squeeze buyers out of more money to buy a home. And once that buyer marks up and agrees to buy the home at 50K-100k above asking, what do you think that person will do when it's time to sell? At the rate that the market is going in, only the very rich will be able to afford even a decent home on a small plot of land.
We, the middle-class, are going to regret this greedy behavior of transforming homes into saleable products like art and baseball memorabilia. I think too many of us forgot the concept of a home. We're racing to the bottom here...
Most properties are not selling for $50-$100,000 over asking.
Do you think sellers should “ leave $ on the table” for the good of mankind?
Sellers tend to be buyers, too.
Generally speaking, with notable exceptions, home values tend to track or even lag inflation, over time.
I wouldn't sell at $600k b/c I know the valuations are out of control and the people who can afford to pay that much are not my neighbors. I want my home to be affordable. $600k is not affordable for the majority of Americans. And I live in a community that reflects much of America...not just one segment of it. But I'm just speaking for myself. I can comfortably say that I am not adding to this unaffordability housing crisis.
As for how I would decide, I can't say for sure. Maybe stop in the middle and list for $400k? But this is just me with my middle-class cap on trying to preserve what's left of people like me who are being squeezed both ways. The middle-class can't survive if we all we're doing is referring to comps developed by the RE industry who exists to cash in as much as possible on housing. There should be other factors at play, like the neighborhood demographic and average area household income, that should be part of the pricing decision. At least, that's what is what for me when I was selling my home.
I get what you are saying. The $200k to $600k were just numbers I made up to illustrate the point. Let's look at it a different way. Did you sell your Austin home significantly below comps, to meet what you determined is fair and affordable? Or did you sell at/near comps, and that also happens to be what you think is fair and affordable? In either case a person could say wow that Brownpine is a great person, not trying to gouge potential buyers with an inflated price. Or they could say Brownpine is making HOW much off this sale!? That's ridiculous!
I'm not trying to call you out, so I hope you don't take it as such. DW and I are middle class folks as well, and couldn't imagine buying a home for $600k today. We sold last year in a pretty hot market, had multiple offers. We listed on the low end of comps and accepted the strongest offer without pushing for "best and final" or bidding war. The offer we chose was a nice young man buying his first house, which was my same position when I bought it. We were happy to sell it to him versus a flipper or an investor who would rent it out. So I'm right there with you on a lot of your thoughts.
I just think it's interesting to have these conversations about what things are worth, what is fair pricing, etc. I suppose ever since there's been real estate there's been people saying "House prices are so crazy right now, when will they come down back to NORMAL prices?" But that idea of normal/reasonable/fair seems to clash against the realities of our system.
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