• want to test the market at a high price prior to listing on the MLS, 
• don’t want to advertise to all of the neighbors that the house is for sale, 
• don’t want open houses or a large number of people in the house, or
• believe it might be difficult to sell and don’t want the Days on Market on the MLS accruing before they have had a chance to “soft-sell” it

Today, there are several sites for aggregating off-market properties and so off-market properties now resemble MLS-listed properties, except for usually with a higher price tag.  Thus, truly off-market properties don’t really exist anymore.  

Setting the list price under your expected sale price is the norm on the Peninsula in order to create more interest and offers (which can lead to more aggressive counter offers).  However, beware that a house going for way over list price may just be an intentional strategy to boost the firm’s reputation and make people believe that the market may be hotter than it actually is.   I don’t recommend using or not using a firm that intentionally underprices the listing, I’m only suggesting to beware of gauging the market sentiment or a the ability of a firm based on how much over list price that homes are selling for.

If you are the buyer, you aren’t actually paying any commission.  However, on the closing, you will see your agent’s broker being paid out of the proceeds – so indirectly you are paying some of the commission because the purchase price is “inflated” by that same 2.25 – 3%.

When people list their houses, most people use an agent that is either a friend or relative, referred to them by a friend or relative, helped them buy their house, or sent them a mailer.  

What are some alternatives if you are looking to save some money on the sale of your property? 

1. You could do a for sale by owner (FSBO), but you would only be saving the seller’s real estate commission (1-3%) because if your buyer came in through an agent, like most do, you would still owe a buyer’s agent a commission.  I do NOT recommend this strategy.  Most buyers think FSBOs are not motivated sellers and don’t want to waste their time.  Also, a lot of work will fall on you, the seller.  In addition, you will definitely be paying the cost of staging and other costs.
2. You could find an agent that offers a lower seller’s commission.  Redfin is probably the most visible one of the “discount” brokers, but I don’t have much experience with them and don’t see many listings by them.  A reduced commission should may mean that you receive inferior service or a lower price.  Email me if you want an agent recommendation.

Even though I am a broker, I have always used an agent to sell each one of my houses and always recognize the value of using a real estate agent.  Don’t cheap out on this.  If saving money on the transaction is important, email me for suggestions.  

Predicting coronavirus infection and survival rates is not my specialty and that should be saved for the epidemiologists. Regardless, I believe unemployment will continue to rise significantly, the stock market will continue to decline, and people will continue to panic and act irrationally (e.g. toilet paper rationing). Economically, I believe it’s going to look similar to 2008 to 2011. Many of us in the Bay Area have amnesia since it was a while ago, so let me remind you what happened — US unemployment peaked around 10%, Santa Clara County unemployment peaked at over 10% and the NASDAQ and S&P 500 both dropped by more than 50%. I don’t think we’re going to escape with any less economic damage than the 2008 to 2011 downturn at the peak of this pandemic.

Let’s see what happened to the Peninsula real estate market during this time period. We’ll use Central Menlo Park as an example. I pulled extensive data on Central Menlo Park back from 1998 to present to look at houses that sold during that period. Below you can see what happened to overall price per square foot (Figure 1).

From the peak in 2008 to the bottom in 2011 (2011 was the bottom even if not indicated in this graph), overall prices in Central Menlo Park dropped 10%. If we look at the upper end of the market with homes greater than 4,000 sq ft in Central Menlo Park (Figure 2), we can see that the median sale price dropped 1% from 2008 to 2011. Based on this data, the upper end of the market fared better than the average market, but the upper end of Central Menlo Park has generally been a stable market and in high demand in most economic environments. Compared to the 40–50% drops in property values that we saw in the rest of the country during the Great Recession, the Peninsula real estate values were more resilient.

The question is whether the Peninsula real estate market during and following COVID-19 will see a repeat of the Great Recession, a milder version or a worse version. While the cause of the market change is very different than the 2008 to 2011 time period, the economic result so far seems to be very similar — close to 0% interest rates, large stimulus package, plummeting oil prices, and high unemployment. Initially, we are seeing a slight decrease in home prices as uncertainty is high. However, assuming the US maintains low interest rates and continues to stimulate the economy through this pandemic, house prices are likely to increase dramatically. As Work From Home continues to become the norm, people will leave the Bay Area for greener pastures and increase property values elsewhere. In addition, people in the Bay Area are likely to move towards larger houses and properties with more distance between them. Ultimately, I see median home prices in the Bay Area increasing at approximately 10% per year for the next year or two.