August 5, 2013

Overbidding in Mountain View. Real Overbidding

We’ve discussed Real Bay Area cred many times here, and one way to tell you’re dealing with the RBA is that of course your property should attract plenty of overbidding.  Burbed reader steve writes in to let us know about a blog post that discussed what the sellers are thinking when getting those bids.

This couple traded up from Mountain View to Palo Alto, rebuilding their house as well.  But it’s this piece on the sale of their Mountain View house that we think Burbed readers would find intriguing.  What kind of bids go straight into the trash, never to be considered? Which bids made it to Round 2 of overbidding?  And do you consider the “winner” of this process to be the Stupidest Person Left Standing, or the Lucky Owner of a home in Mountain View’s finest zip code?

Sold! A behind the scenes look at the selling of our Mountain View home & tips for buying in a crazy market.

130804-overbids-house

Kudos to our real estate agent, Erika Enos! Our house sold fast and for more than we were expecting.

This week we officially handed over the keys to the Cuesta Park Charmer. We are very happy that we found a nice new family to love the home and the process went relatively smoothly. Compared to the angst of being on the bidding side of the table being a seller is this market is a joyride. Here’s how everything played out:

The Stats

List price:  $1,228,000
Sale price: $1,603,500 (~30% over asking), no contingencies, 25-day close
Open House visitors on Sat & Sun: ~150
Views of virtual tour: 8091 (32% of referring web pages came via HomeCrunch! vs. 26% via MLS)
Requests for disclosure package: 35
Offers: 10

You can read all the details over on Kay Luo’s site HomeCrunch, which is mostly about their adventures building their new house there. But what can the Burbed reader take away from this sellers-eye-view of the overbidding process?  Let’s take a look at the house itself.

130804-bond-redfin780 BOND Way
Mountain View, CA 94040
Sold for $1,603,500
Listed for $1,228,000

4 Beds
2.5 Baths
1,983 Sq. Ft.
$809 / Sq. Ft.
Built: 1952
Lot Size: 5,096 Sq. Ft.
Sold On: Jun 10, 2013
Status: Sold
Property Type: Detached Single Family
Stories: 1
Community: Miramonte
MLS#: 81315689
Style: Ranch, Contemporary
View: Neighborhood
County: Santa Clara

Perfect marriage of craftsman and contemporary renovation. Rare 4 bedroom, 2 1/12 bath home with family rm which has access to private patio & rear garden. Hardwd flrs, copious storage in state of the art kitchen, skylights in kit & family rm. Contemporary styled baths, spacious master suite, 4th bedrm perfect for office or nursery, newer roof, close to Cuesta Pk, dwntwn Mtn Vw & all Silicon Valley

130804-bond-livingThis couple did one thing right: they bought in the RBA. We know this house is in the RBA, not only from the 94040 zip code, but the fact that the home sold for more than double in only eight years. QED!  (That stands for Quite Excellent Deal!)  They did this despite not having a picture of the front of the house in the first picture, too.

Now, let’s examine what we can learn from the blog post itself.

First, the list of which offers were considered and which weren’t is useful.  If you’re still house hunting, maybe you’re making one of the mistakes called out there.  That means stop putting in contingencies in your bids during a seller’s market.  Instead, ask the seller what contingencies they would like to place onto the buyer.  How about 90 days’ free rent after the sale for starters?

130804-bond-bedroomNext, while suitcases full of cash may not be King, they’re still pretty Ace.

Third, if you write an entertaining blog, you can send plenty of people to look at your virtual tour.  That is, you can get more referrals from you own blog than the MLS.

Fourth, you know those stupid beg letters we’ve been laughing at? They work.  So if you want to buy someone’s house full of family memories and rip it to pieces, write a tear-jerking letter about how much you love the place and how it’s perfect for your 2.1 children and pooch.  After you buy it, fire up the bulldozer because it’s yours and tough luck if the sellers actually believed your fanfiction.

What do you think of Kay’s look at being an overbid recipient?

Comments (21) -- Posted by: madhaus @ 7:09 am

21 Responses to “Overbidding in Mountain View. Real Overbidding”

  1. SiO2 Says:

    Wow.
    That house looks nice, but, small lot & Mtn view elem (some MV houses have Los Altos elem). For $1.6m.

  2. Petsmart groomer Says:

    That’s a lot of words to simply say that the highest offer won.

  3. No2Realtards Says:

    Those evil Chindians with suitcases full of cash have ruined the state of California!

    They’ve certainly ruined it for evil bigots. –ed.

  4. Gallileo Says:

    The big issue here is that you don’t take the median offer, you take the offer from from the craziest person you believe has the ability to close the deal.

    When I sold my very RBA house a couple of years ago, we had fifteenish offers, in a very clear bell curve. There were the crazy low-bids, very much outliers. Then there was a cluster right around asking, maybe slightly higher, but not much.

    Then there were two or three absolutely crazy offers way above asking, with no contingencies and suitcases of cash.

    Of course we didn’t do anything more than glance at the low-ballers, and of course we looked at the reasonable offers, but when crazy guy is offering $100K more than the reasonable ones, you take it. That is real money.

    So the person willing to pay the most for the house sets the price, and the environment underwhich the next house gets sold.

  5. sfbubblebuyer Says:

    That’s completely different than my home buying experience. We offered way under asking, walked when the seller countered, then resubmitted our offer with a tiny price bump (1%) 2 months later and had it accepted. With 2 week ‘any and all causes’ contingency. I can’t imagine trying to buy a house now. Wait, yes I can! We started shopping in 2007 and I had a full on freak out in front of my wife, her parents, and our realtor, and my wife said we could wait a year (or almost three, as it turned out) before buying. I would advise all current buyers to follow the same pattern. I bet buying in 2016 will be cheaper than now.

  6. SEA Says:

    “So the person willing to pay the most for the house sets the price, and the environment underwhich the next house gets sold.”

    Nope. The person who is second in line sets the price.

    This is the first-price situation, but every potential buyer knows the rules, so each offer is adjusted accordingly.

  7. Gallileo Says:

    @SEA

    Well, not exactly.

    In a first-price sealed bid auction, what sets the price is what the first person in line _thinks_ the second person in line is willing to pay.

    But he really has no way of knowing, and his guess may be way off. It certainly was in my situation.

    And the error in that guess propagates to the market with absolutely no feedback. The market has no idea if the winner won by a single dollar or a million.

    And every single person involved in the process (but the bidder himself) has incentive to make him think the second person is bidding

  8. nomadic Says:

    A nice, yet modest, house on a postage stamp lot goes for $1.6M these days? I might as well change my name. I’m never moving again. This is ridiculous.

    Did anyone else wonder about this phrase in the tale?
    We didn’t have a large mortgage left on the house so the carrying costs were less than $200/day.

    That seems pretty steep to me.

    As for the letters, I think they’re awful. It’s undignified for buyers and sellers should not want them. Ick.

  9. Alex Says:

    It’s another way of saying money talks, and the rest can walk.

  10. SEA Says:

    #6- A few nice assumptions provides a fairly easy path to a Bayes-Nash equilibrium.

    “The market has no idea if the winner won by a single dollar or a million.”

    When bidding on $10k items, I always know that I am not overbidding by a million, and I really don’t care if I’m an extra $1 over, since $1 is not material to my $10k bid. That said, if you really have no idea about the market, I suggest you become a REALTOR.

  11. quodlibet Says:

    It’s bizarre to me that those personal letters have any bearing on a real estate transaction. I’m a homeowner and I DO NOT CARE what happens to my house after I sell it. Maybe I am mildly curious, but I don’t care if their dog loves the dog door we installed, or their two kids love the two small bedrooms or the blue tile in the bathroom or whatever. Rip out the tile! Paint the walls! Complain about the moldings I picked out because they were cheap! I. do. not. care. As the seller, all I care about is that you pay the best price for my house and the deal doesn’t fall through.

  12. nomadic Says:

    “The market has no idea if the winner won by a single dollar or a million.”

    Ponder this: how would you like to be a “top 3″ bidder, be asked to sweeten the deal and “win.” All the while, you were the #1 bidder in the first round and didn’t have to add a single dollar to stay the #1 bidder after the second round. Bummer, dude.

  13. Alex Says:

    Way to go #10. What you’re saying is you don’t care about f**K! All you care is money. I wholeheartedly agree!If I can take you to the cleaners I will.

  14. steve Says:

    madhaus, thanks for the excellent write up.

  15. madhaus Says:

    Since I added #3 from the moderation queue (where perhaps it should have stayed), #10 is now #11, in case you were wondering WTF #13 was talking about.

    #14, thanks very much.

    Love & xxx, #15.

  16. SEA Says:

    #12- Time to lower the offer. Like the guy who suggested I must sign the contract the same day for a new roof. I asked, “What’s the price if I sign in a month?” Suddenly the quote was firm for a full 30 days.

    #13- I don’t pay more than what something is worth.

  17. SEA Says:

    And since #15 wasn’t then where I wrote #16, #12 & #13 in #16 needs to be indexed accordingly.

  18. Gallileo Says:

    @10 (At least it is #10 when I write this….)

    Perhaps the most frustrating thing about the RE market is that there isn’t enough transparency about the second price.

    In my home’s case, the winner was significantly more thant $10K over the next offer. You are smarter than the average bear, but very few players in the RBA Real Estate market play the game perfectly, or even well.

    In any event, you can prove that a market has reached Nash Equilibrium if everyone reveals their bidding strategies to each other, and no one changes their strategy.

    I think it is safe to say that we haven’t reached one in RBA Real Estate.

  19. SEA Says:

    “the winner was significantly more thant $10K over the next offer.”

    So I received a call from a friend who went on and on about losing $20k on some deal. I forget the details of the deal, but his kvetching was over the top. When I asked how much he spends on a trip to Vegas, it really put the $20k in perspective.

  20. MI in SV Says:

    We recently sold two homes in other parts of California (yes so we could buy one high-priced home in SV and in the nearly-least-desirable-on-paper-San Jose, even!).

    Both homes had a fistful of offers on them, and we didn’t play the “price it low” game either. The home in a very cheap area (Palm Springs) had two that were all-cash. We picked the one that was #1 by a very slight margin only because the offer was 2 week escrow with no contigencies (#2 had 30 day and per inspection). We offered to counter #2 but their realtor stood pat with a “offer stands, no changes.” In the end, #2 got the house b/c #1 had a misunderstanding with their funding. So, I guess the moral is, sometimes those who stick to their offer and don’t get sucked in to a bidding war, do get the house.

    And, in regards to the other house, as the more emotional one (okay, the woman) in the marriage, I was totally sucked in by The Letter. However, my husband and Realtor were, wisely, not. LOL. I guess in that part of SoCal, letters are still only accompanying the lesser offers. I did feel guilty about it, though. ;) BUT not enough to potentially stretch the deal out extra months.

  21. mtv-renter Says:

    This article is in line with what I’ve seen trying to buy in Mountain View. I rent in the Cuesta park area, and was looking to buy there. I bid ~15% over asking on two houses, one with no contingencies, one with just an appraisal contingency. Much larger offers (30-40% over asking) took the houses. When interest rates spiked a month ago, offers basically disappeared, so I bought a nice house with no other offers to contend with. The market is very fickle, and very dependent on credit. It’s unstable.


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