In the Bay Area, prices have little meaning. Rather than signaling what a seller hopes to get, they function as the opening bid at an auction, agents and buyers say, with sellers hoping a low price will intensify excitement and create a bidding war.
Across the country, 32% of homes sell for above the asking price, according to real estate listing website Redfin. But in the five-county Bay Area, as of 2024, the share is 61%. That’s an increase from 58% in 2023 — the worst year for home sales in 15 years
Underpricing is a common strategy in hot markets, where agents expect demand to drive multiple offers. It’s typically used in luxury markets, where buyers are more willing to stretch their budgets to capture a house. For in-demand cities like Berkeley and Sunnyvale, nearly 80% of homes sold in 2024 went over asking.
In Fremont and San Jose, the number is closer to 70%.
Nishimura hosted two open houses and set a deadline for offers. Thirty came in — more than Nishimura had ever received. The winning bid was $1.6 million. While she expected the home to sell above the asking price, Nishimura didn’t expect such an extreme difference.
But often, it’s much more. In February, Jodi Nishimura of Kai Real Estate listed a hexagonal 1,378-square-foot mid-century home in the Berkeley Hills with views of the bay. The asking price? $795,000.
Nishimura hosted two open houses and set a deadline for offers. Thirty came in — more than Nishimura had ever received. The winning bid was $1.6 million. While she expected the home to sell above the asking price, Nishimura didn’t expect such an extreme difference.
Buyer Adi Dasgupta was frustrated that the underpricing strategy meant that he had to rely on an agent to tell him what they thought the sales price would be.
But Dasgupta felt that his agent’s incentive — to get him to place the highest bid in hopes of a larger slice of the commission — wasn’t aligned with his — tonput in the lowest possible bid that would still win the house.
So Dasgupta, a social science researcher, built his own statistical model to predict a home’s selling price based on what comparable properties sold for in the previous year.
“I felt like the model was getting closer to the truth than what our agent was telling us,” Dasgupta said.
When Dasgupta found a property he liked, he plugged it into his algorithm, which convinced him to put in a bid slightly under what his agent advised. It was enough to win the house.
For agents, underpricing properties also has another clear benefit — they are more likely to sell quicker, said Bennie Waller, a professor of real estate at the University of Alabama who studies pricing strategies.
While keeping a home on the market for, say, a month could end up attracting more bidders and higher offers, an agent would only end up netting a smallm amount more in commission, versus selling two houses in that time.
“It’s like a busy restaurant, where the staff want to turn over tables as quickly as possible,” Waller said. “Agents want to list these properties so they can sell them and move onto the next one.”
But some agents are rejecting the underpricing game in favor of more transparent pricing, which they say leads to fewer bidding wars, and offers closer to what sellers expect.
“I get fewer offers on my listings, but I am getting top dollar for my clients,” said Julie Wyss, an agent based in Los Gatos. “That’s two different things.”
“Agents will say, ‘I got multiple offers’ as a badge of honor,” Wyss added. “It means nothing.”
Pushing buyers into bidding wars can also leave them with a sense of bitterness, or the worry that they’ve overpaid, said Gina Marciana, a Compass agent who focuses on San Jose’s upscale Willow Glen neighborhood. “It doesn’t always make for a nice escrow,” she said.
And sometimes, underpricing doesn’t work out for sellers.
Jordan Jewell, 32, and his partner, Helen Seldin, 33, were considering a home priced at just under a million dollars in Berkeley, but figured that it would sell for closer to $1.2 million, which was out of their price range.
But the seller rejected the first two offers that came in because they thought they were too low. After the home languished on the market for a few weeks longer, Jewell and Seldin made an offer of $1.1 million, which the seller accepted.
“You have this stupid system where if you price it for the price you want, people think you actually want more than that,” Jewell said. “It’s hard to break thenchain unless some agents say, ‘We’re pricing for the price we’re looking for.’”
But many agents say that the underpricing strategy is so entrenched here in the Bay Area that it’s impossible to change.
“Because it’s been done like this for so long, if we list a home at a transparent price, it just sits there because buyers think it’s going to go over,” said Norah Brower, an agent based in Oakland. “In other parts of the country, you list it at a particular price, and it usually goes for that price or under. It just doesn’t work that way here.”
