Demand has outweighed supply for the past 4 + years. In a market with many competitive offer situations, the list price can become an arbitrary number. In the Bay Area especially, it’s common for homes to go far beyond the value of neighborhood comps.
Why do we care?
If the winning buyer is obtaining a loan, this means they also likely need to get an appraisal to verify the value matches up with the purchase price. In an appreciating market, sometimes these appraisals come up short. When appraisals come in below the purchase price, the buyer has the option to exit the transaction or re-negotiate. Although this does not always apply if the buyer is paying cash or has a “no contingencies” offer, it’s worth paying attention to.
How do sellers prevent this?
The first thing sellers should do is hire an experienced agent. A seasoned local professional will know how to navigate a multiple offer scenario. Which offer to select, contingencies to drop, and what terms to counter will be a very important asset in the bidding war process. The last thing you need is for your top offer to fall through due to an unforeseen appraisal issue.