There is a lot of debate on what strategy works best when it comes to selling property.
It is almost universally agreed here in the South Bay that homes in the median price range, with plenty of comps, are best served coming to the MLS by slightly underpricing or matching their most recent comparable sales.
In a low inventory environment, sellers typically have the upper hand, and with so many buyers, a slightly underpriced/well-prepared listing will receive multiple offers after a weekend and sell at or above its most recent comparable sale.
Debates still exist on how to price luxury property or unique high-priced property. Since there are rarely do-overs to test the theory, I believe people will argue over what luxury pricing strategy is best for years to come.
This week, I am going to share two unique, high-priced blufftop properties in Palos Verdes Estates to allow us to enjoy a case study on pricing strategy.
Paseo Del Mar
Paseo Del Mar is one of the most prestigious streets in all of Palos Verdes. Especially, homes on the bluff side of the street in Malaga Cove. Property sales above $10 million are not unheard of in this area.
Last year, an auction property came out asking an astonishing $2,495,000 and the real estate community went crazy.
I made an Instagram video about the auction (and the amazing low price) and the video went viral – garnering over 100,000 views and over 1,600 shares. That was quite an incredible effect thanks to the auction pricing frenzy.
See the next section for details on the auction property and results of the sale.
Auction Listing
Below is a link to the auction listing with its asking price and final closing sale.
- 3-beds, 3-baths, 2,266 sq. ft., 20,452 sq. ft. lot
- Auction Ask: $2,495,000
- Sold Price: $7,000,000
I was fortunate enough to attend the pre-auction open houses with multiple clients. The property, location, and views were beautiful…but the home was highly unique and probably best as a tear-down considering the lot.
According to our analysis (and other local agents), we felt the investor price was around $4 to $5 million but thanks to the frenzy created by the auction, many wealthy owner-occupiers had come out from across greater Los Angeles.
We guessed that it might sell at $6 million, and due to the auction, someone might get emotional and overpay. And that is exactly what happened, the auction hammer closed at $7 million which I felt was a major overpayment.
No slight to the buyer because if you have the funds and want a special property, then it is fine to overpay—but many in the community doubted this would have happened without the auction-style pricing.
What an amazing result for the seller.
Ask High Listing
Just a few parcels down the street, another Paseo Del Mar property came to market.
- 3-beds, 4-baths, 4,878 sq. ft., 42,423 sq. ft. lot
- Original Asking $11,995,000
- Sold: $7,500,000
As you can see below, this property came out asking a very high price and was forced to cut like crazy to find a buyer.
- 11.995M listing (9/2023),
- Cut to 10.995M, then cancelled
- $9.995M re-listed (1/2024), then cancelled
- $8.995M re-listed (3/2024)
- Deal made and closed for $7.5M (4/2024)
That list and price cut sequence is a major battle with the seller on their heels the entire time.
When you consider that the auction property selling at $7 million for a home half the home size, a lot half the size, and lacking the tennis court, etc.,—the buyer paying just $500K more is a downright steal at $7.5M.
Final Thoughts
Now, of course, we have no insight into the condition of the property, disclosures, or geo-technical reports on the edge of the bluff of either property which greatly affect their values with hidden risks.
That said, an auction even on high-end luxury property seems to deliver the most desirable result—at least when it comes to these two examples.
In a way, it is tough to underprice a property and get a bad result. If it is priced well below value, then you get an influx of interested buyers, and ultimately, find the multiple buyers with emotional attachment and willingness to pay (or overpay) market price.
On the flip side, overpricing forces a seller to wait and play defense. In the case of 709 Paseo Del Mar, the seller was forced to cut multiple times and then swim with the sharks by taking a massive discount to get a deal done.
There is no hindsight in listing residential real estate as you only get one chance. There are plenty of “depends” and exceptions to the rules when selling a property. But time and time again, auctioning or intentionally underpricing homes seems to yield excellent results.
It is not right for every property, but sellers should certainly carefully consider the strategy and if it is the best option for them to achieve the highest and best offer.
Richard Haynes
DRE: 01779425
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The Richard Haynes Real Estate ShowA leader in South Bay real estate for the better part of a decade, Richard thrives as an advisor to his clients with over $248 million in sales as a broker or investment principal at his boutique agency, Haynes. Richard is known for his keen local market insights which have been featured in the L.A. Times, The Street, and Forbes, along with his weekly South Bay real estate blog. [read more]