We’re not going to belabor the point, but regardless of your budget, we think it’s worth keeping an eye on the multi-million dollar properties we often feature on SocketSite.
The reasons stretch beyond design and decorating inspiration, beyond hints for marketing your property when the time comes, and beyond pure escapism. If for no other reason, keep in mind that the upper end of the market is often a leading indicator for the broader market in general.
Gathering accurate sales data for the upper end of the market, however, can be a challenge. Consider a note we received from a Realtor:

…the current trend among high-end realtors [is] to encourage clients to keep the sales prices of their purchases “confidential.” When this is done, the sale is marked as the listing price with an asterisk [in the MLS]. High-end properties (above 4 million) RARELY sell for full price. But realtors use the confidential sale stats in their analysis so the cost per square foot of many district 7 and 8 properties have been skewed.

This is not a trivial point. If the practice is prevalent, it not only skews MLS reported cost per square foot, but the median sales price (and implied appreciation) for luxury properties, and the reported “percentage over/under” asking for the market as a whole. And of course, it skews expectations.
Perhaps that’s part of the reason that half of the top 2% of active listings in San Francisco (ranging in price from $4,000,000 to $65,000,000) have undergone at least one price reduction. And that on average, these properties have been reduced by a total of 12.2% (a median reduction of 11.9%). Then again, it might just be the market.

Comments from Plugged-In Readers

  1. Posted by Mark

    I don’t understand this “trend”. Don’t sale prices have to be accurately recorded with and reported to the county for tax purposes? Wouldn’t any deliberate mis-reporting of this information be a kind of tax fraud? And isn’t this information available to the public through the county? (This is how Zillow collects sale price information, isn’t it?)
    How, then, is it possible that realtors of high end properties are able to keep the selling price “confidential”?

  2. Posted by westsidebubble

    When you hear stats about average/median sales price, volume, etc, these are almost always put out by your state Realtor(TM) association, using MLS data.
    The sale price is recorded by your local tax assessor, but it is not always available immediately, and I would guess, not always actualy recorded. Sale price often has nothing to do with assessment, since generally houses are assessed every few years, and not on transfer (at least in MA).
    In Massachusetts, we get data from the MAR, as well as a trade group, which reports on sales that do not go through MLS. These two groups generally give slightly different pictures of the local market.
    Is it possible that Realtors are manipulating statistics by intentionally mis-reporting sale price in MLS? Let’s think that one over for a millisecond. Yes.

  3. Posted by Frederick

    WHAT WAS THE REAL SELLING PRICE?
    The actual selling price of residential and commercial real estate in San Francisco is information that is very valuable. Each party to the sales transaction has a vested interest in revealing the actual selling price.
    The seller, buyer, lenders, real estate brokers on both sides of the transaction, appraisers, future buyers and sellers, readers of Socketsite and other blogs, credit entities, data reporting entities (Data Quick), Real Estate Multiple Listing services and many, many other entities want to know the selling price.
    In addition to the actual recorded selling price at the City of San Francisco Recorder’s office, most of those parties that want this information also want to know what credits, deductions, 1031 Tax trade effects, and other items were deducted or added to the recorded selling price that the Title/Escrow company recorded at the recorders office.
    Because most developers and commercial property owners do not want to disclose this information, they are fairly adept at not revealing the actual selling price.
    In San Francisco, the San Francisco Association of Realtors allows the selling price to be reported to the MLS as the last asking price with an *, if the Buyer, Seller and Brokers agree in writing. As you can guess most Buyers and Sellers would want this information to remain private (why would you, as a Buyer or Seller, want to have the world know your personal financial activities?)
    Yet, the Tax Assessor’s Office has the right to collect this information to re-assess the property for property tax purposes. They do not have the right to sell this information to private or public entities, but they do, which is how the SFAR MLS, Data Quick and most other interested parties discover this information.
    You can also get it if you visit the Assessor’s Office in person. But, even that can be difficult, as many developers hide the selling price by having the tax stamp placed on a different document than the deed or other recorded document.
    All realtors have to have accurate information as they can not possibly assist buyers and sellers as to current market conditions, without “real” data. So they net work with each other and fellow appraisers, lenders, etc to gather correct selling prices.
    As to realtors intentionally misreporting data to the MLS, that is a short sided view. Most Brokers have been representing Buyers and Seller for decades and would not be respected by their piers if they mis-reported the selling prices.
    All of these sales are discussed daily and weekly by all the active brokers. There are probably 500 brokers, appraisers and buyers and sellers that discuss EVERY sale in San Francisco.
    An agent that consistantly tried to mis-report sales data would not last long in this business.
    Any one can hide the selling price or as most developers do, not report the discounts given to buyers for upgrades, extra parking, loan buy-downs, etc.
    If you want to find out the real selling price, find a realtor that works in the neighborhood you are interested in and call them.
    Good Luck.
    Frederick

  4. Posted by Michael

    With all due respect, if all the brokers, appraisers, buyers and sellers have such perfect information, then why are we seeing so many significant price reductions?

  5. Posted by Amen Corner

    Because a lot of people think their property is “special” and a greater fool will be found to pay over the odds for it?

  6. Posted by garrett

    as far as data tracking goes, sure, it’s nice to know when the asking price was lowered or raised, but in the end, none of that matters. a home is only worth as much as somebody is willing to pay for it. if the sales price is the only price input into the MLS, who cares? that doesn’t skew the price per square feet data(that figure can be determined by the final sales price and the size of the house). listen, i’m all for open and honest data sharing and in fact, i find it to be imperative in the decision making process, but when it comes to writing an offer on a house, the comps a buyer and agent will use are not inaccurate if the sales price has been entered–no matter what the original asking price was. am i missing the point?

  7. Posted by Frederick

    Dear Michael and Amen,
    Like most commodities, a sales price is when a willing buyer and seller agree, at a moment in time to buy/sell.
    That moment in time is moving, every minute, hour and day. Most seller’s that end up reducing the asking price for real estate have not invested the time to understand the imperfect market, that real estate operates under.
    It’s almost impossible to find a true apple to apple comparison when you buy/sell a home and even more difficult to define all the conditions that are considered by buyers/sellers at the moment they finally agree to make or accept and offer.
    Most seller’s that end up reducing the asking price, used comparable selling prices for their property that were sales completed 60 to 90 days before they offered their property for sale and those sales were offers that were made 30 to 60 days before the actual sale was completed.
    The net of this is that most sellers are looking at data that is 4 to 6 months behind the actual market, and are afraid to “leave money on the table by asking too little”.
    It’s an interesting time to be a Buyer, as it is hard to guess when the market will change and become a sellers market again. It may be 1 or 2 years or even longer or it could be 1 or 2 quarters. Watch the stock market and the builder’s stock indexes! That is where the money is betting the housing market will change.
    Frederick

  8. Posted by Anonymous

    garrett, that seems to be the whole problem. If I understand it correctly, for “confidential” sales, the final “sales” price that is recorded in the MLS is simply the list price and NOT what the buyer actually paid! As such, when used as a comp (or in any MLS report), it is inaccurate!

  9. Posted by garrett

    ahhh, ok, i see. i was slightly confused and i’d have to agree, i don’t like that tactic. i also want to agree with frederick–there are so many circumstances that surround each and every transaction–sometimes it’s a family emergency, sometimes it’s a disgruntled CEO that needs to liquidate assets or conversely, maybe the seller has all the time in the world and will wait to get their asking price. as i stated in my earlier comment (and it’s nothing profound), a home is only worth what somebody is willing to pay for it. many of times what somebody is willing to pay for it can be and should be influenced by comparable sales, but in this case, we are discussing multi-million dollar estates, many of which are historic in nature and custom built, thus very hard to compare apples to apples. often time emotions get in the way of a business decision and the comps mean very little. i’d image that most people that can afford homes above $5 million are fairly savvy and do as much due diligence that is possible.

  10. Posted by rut

    I’m not so sure I buy into the multi million/high end property being a leading indicator of the broader market, or at least being a very good one. The luxury property buyer segment is very small subset of the overall market especially when some of the price reductions on these properties are higher than the median price of a U.S. home (appx $227k). It’s much more plausible to have weakness in high end properties while lower end properties experience robust demand, than vice versa. Luxury buyers are much less sensitive to interest rate changes and more likely own multiple properties. I’d say better leading indicators of the broader market would include mortgage applications, mortgage interest rates, housing starts, and cancellation rates. As well, given the comments regarding opaque sales data on high end properties, suggests the data may be unreliable.

  11. Posted by eddy

    These houses at this end of the spectrum are always fun to watch. I tend to agree that the high end are a key indicator. These people with this type of cash flow aren’t fools with money. They are generally market savvy and are the first to understand when an asset is over or undervalued. As for prices being skewed, its always in the best interest of high end good to disassociate value from the actual goods or services. What do you think it really costs to manufacture, ship or sell a Louis Vuton, Rolex, or any other high end product. Not as much as you’d think and its better to sell emotion than goods.

  12. Posted by JOE SCOVEL

    THE REPORTING OF A SALES PRICE SHOULD BE AT THE OPTION OF THE BUYER AND SELLER ONLY. THE MLS HAS A REQUIREMENT IN THEIR LISTING CONTRACTS THAT NULLIFY MANY STATE LAWS WHICH PROVIDE FOR CONFIDENTIALITY IN THE SALE AND TRANSFER OF REAL PROPERTY IE:”FOR TEN DOLLARS AND OTHER VALUABLE CONSIDERATION”. THE MLS LISTING CONTRACT REQUIRES THE RIGHT TO PUBLISH THE SALES PRICE BECAUSE THE MLS SELLS THIS INFORMATION TO THE COUNTY ASSESSORS OFFICE AND TO OTHERS IN THE REAL ESTATE BUSINESS THAT FIND THE DATA PROFITABLE.

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