SF Home Buyer Guide to Askhole Sellers (1/3)

If the head-turning world of San Francisco real estate the past few years has been defined by one thing, it’s OUTRAGEOUS overbids. Indeed, local agents have a unique and longstanding custom of pricing listings *strategically* so as to generate multiple offers and let the market (i.e. buyers) determine a home’s value. This typically looks like a listing being published to the MLS, followed by 1-2 weeks of active marketing and showings, and subsequently a date is announced to review any offers.

Especially in a sellers market, pricing a listing at the low end (or slightly below) recent comparables is an all but surefire way to procure competing offers that will spur a winner to the highest price and best terms. From an economic standpoint, this works to minimize inefficiencies and keep inventory moving; we can point to a high rate of absorption as evidence of a robust market. More on that in SF Home Buyer Guide to Askhole Sellers (3/3).

Taken to the extreme, underpricing a listing can inspire headlines lauding — or lamenting — sales that receive an obscene number of offers and sell way over list price. This was an occurrence all too common in San Francisco’s most recent real estate cycle where home buyer demand driven by well-paying tech jobs, venture capital, and start-up IPOs veritably wooped the market.

One of the more egregious examples from this time, the property below in Pacific Heights sold for 76.9 percent above the list price. In the six months before selling, single-family homes within a half mile radius sold for between $2.7 million and $6 million. This bad boy was grossly underpriced at $2,095,000. Sure, it had its challenges: it was a single-family home that had been split into three units and the finishes were terribly outdated. But it also sits on a huge 4,300+ square foot lot, on a rare flat block, sandwiched between Alta Plaza Park and Lafayette Park. It received 38 offers. Listing photos below courtesy of SFAR MLS.

To the sellers participating in extreme overbids: You might be an askhole. That’s right, an askhole.

Askhole: One who asks for much and expects to receive as much if not more, often without regard to diminishing returns and self-defeat by asking for too much. An askhole may be described as arrogant, delusional, and/or sadistic.

There are two types of askholes out there:

Category 1 askholes reveal themselves upfront. These sellers are more of a headache for listing agents than anyone else. No realistic offer will be high enough to be acceptable, and then the seller will blame their agent when the listing fails to sell. Note to all agents out there: don’t take these listings. And if you invite this behavior by buying listings, then good luck with that.

Category 2 askholes ask very little at face value but cannot wait to suck all the air out of the room. This type of seller is much more common and their impact on the market is far-reaching. To the untrained eye, an aggressively low list price for their property may seem like an opportunity too good to be true, but they’re really asking for buyers to bridge a huge gap to arrive at a realistic purchase price. When all is said and done, many prospective buyers will be disappointed. Instead of achieving transactional efficiency, they clog the system and contribute to buyer fatigue.

Top 10 highest San Francisco real estate overbids of 2021 from January thru May, ranging from 55% to 81% over list price. Photos below courtesy of SFAR MLS.

Let’s dive deeper into the Category 2 askhole as a function of how greatly they agree to underprice their property relative to true value:

› 0-10%: Free and Clear › This seller is well within the realm of reason. Chances are they had a realistic idea of what their home is worth, or at least were receptive to expert advice, and their agent smartly suggested that they price strategically. After all, it takes only two or three real buyers competing to get the best price. This is the most common type of seller out there. Thank you for making deals happen efficiently.

 

› 10-20%: Reluctant Askhole › This seller may have been acting on bad information (we’ll give them the benefit of the doubt here). Maybe the seller did receive 5-10 offers, and they’re stoked because they followed their agent’s guidance to price slightly below the lowest of the comps. The low list price and need to compete likely didn’t deter any would-be buyers, it just generated unnecessary waste. It takes two to tango the pricing dance — the seller and their agent — and they’ve tangoed responsibly-ish.

 

› 20-35%: Askhole and a Gentleman, Perhaps › At this point, sellers are going to be challenged if they try and claim ignorance. This seller is probably the type of person who needs extra assurance. And that’s fine: they’re risk averse. Maybe they’re also a bit more narcissistic than the average person. At their heart, they’re a good person, and they’re going to be so incredibly grateful to their agent for a job well done. For their agent, it’ll make having to phone in all the “sorry your buyer’s offer wasn’t accepted” calls worthwhile. But there’s going to be a lot of disappointed people on the other end of the line. Maybe this seller should have trusted their better judgment and reeled it in a little.

 

› 35-50%: Grade A Askhole › This seller’s agent is as culpable as they seller here. They’re in cahoots, and neither gives two effs (as the kids say). This seller may believe they know best, but their agent should know better than to agree to make a mockery of weary buyers. Without doubt, at least one or two real buyers will choose not to write an offer. After all, if they win the bidding war, what kind of wild (not fun) ride could escrow be with this seller? As Ariana Grande sings: Thank you, next.

 

› 50%+: Worst Kind of Askhole › Not only is this seller a Grade A Askhole, they’ve done a great job driving another nail into the casket wherein lies the credibility of the real estate profession. They’re responsible for wasting the time of most likely 100+ people — buyers, agents, lenders, home inspectors, and so forth. This seller is beyond the point of not knowing what’s good themself, and on to being utterly shamelessly self-important. They rationalize their behavior by saying that they’re just looking out for #1, but beyond that they delight in watching carnage unfold.

Now that we’ve defined and described the askhole seller, let’s take an in-depth look at three recent examples vis-a-vis San Francisco real estate listings. Click on over to
SF Home Buyer Guide to Askhole Sellers (2/3).