When is Price not Price?

Homebuyers searching in 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.

Tahoe Donner Real Estate

One 3-bedroom cabin in Tahoe Donner got 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 backed to open space, but it did not 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 the seller gets maximum exposure and, perhaps, a bidding war.

Strategic Underpricing: Is it Risky?

If you know, for example, that 300 buyers on any given day are looking for a cabin at Lake Tahoe under $1 million, and you’re confident the home 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 maximum numbers of buyers. The result is often a bidding war in which buyers need to offer more than the asking price, and are often 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, you might end up selling the 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 offers on four homes so far. 

She and her husband are the prototype Tahoe buyer: solid middle class professionals with 2 kids, 2 dogs, and an RV. They can afford something over $1 million, but not by much. And they’re not cash buyers; they’re getting a loan. 

“You can’t go through the normal process and get a loan and compete,” she said. “It’s been frustrating and upsetting.”

Fierce Competition Under $1 Million

Two-thirds of the homes that have sold 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 sold for 5 percent or more over asking, the vast majority – almost 80 percent – hit the market at less than $1 million.

The same has been true at the ski areas, where 3 out of every 4 homes sold so far this year closed at or above the asking price. One small 2-bedroom cabin in Alpine Meadows, for example, closed for $800,000, 28 percent above asking and $733/square foot.

Alpine Meadows Homes

Money vs. Lifestyle

Many of today’s buyers know they are overpaying; they are weighing money against lifestyle, and 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 percent or more above asking. Almost all of those were at the Lake 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 Lake Tahoe has to offer.

The over-asking trend has been more prevalent in some markets like Tahoe Donner than others, like Incline Village, where homes have been selling on average within 1 percent of asking this year, and just half the sales there have been at or over asking.

Thanks to the tax advantages Incline offers to those who can domicile in Nevada, and the fact that all three of its beaches are private to owners and their guests, Incline Village tends to be more expensive than the California side of the Lake. 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 Village this spring. One home on Debra Lane, which is part of a lakefront enclave with its own private HOA beach and pier, fetched $14,350,000 -- $400k over its asking price -- in just a month on the market.Incline Village Debra Ln Pier

Today’s market is challenging for buyers, but not impossible. A good broker should be able to tell you what the 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 get a counter back at the highest price you named.

For buyers looking to navigate today’s 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 feel free to call or email me for advice on Buying or Selling ~ Jackie 775-391-9443

(*This article first appeared in Moonshine Ink)

Posted by Jackie Ginley on


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