Which houses are most likely to sell at the biggest discounts from their list prices ?

     The folks at online brokerage Redfin looked at more than 2,900 house sales in Los Angeles County from April through June, and identified traits of homes that sold for the largest discount from the final asking price.
    Prices came down most when:
    1) the home was listed for more than 90 days
    2) was a fixer-upper
    3) were more likely to have been owned by the seller for 20 years or more or…
    4) were owned for less than five years.

    Redfin also found that sellers who have already cut their list prices often agree to more reductions to get a sale.
    Most of the above are fairly obvious. Sellers who’ve owned a home for more than 20 years will likely make a solid profit even if they come a long way down from their original list price. Those who’ve had the home less than five years may be in mortgage trouble or flippers who need to sell quickly.
     But one conclusion may surprise some: Redfin finds buyers won’t have much luck trying to low-ball foreclosed homes sold by banks. That’s because lenders these days are already offering foreclosed properties at deep discounts.
    The entire study, which includes data for King County, Washington and Fairfax County, Virginia, can be seen at http://www.redifn.com/scientist.

-- Peter Y. Hong

Photo: Getty Images

Questions? Comments? Email: peter.hong@latimes.com

Comments

[the_dragon]

the correct link is http://www.redfin.com/scientist

[Scott McIntosh]

Other homes that you will get bigger discounts for are; homes that are on bad street locations, busy streets, have dis functional floor plans and in between being a fixer and remodeled home. With a larger selection of inventory now on the market, buyers have the option to be picky. So any house that has any defects, like the ones mentioned above, will have to be discounted in order to get sold.

http://www.thewestwoodblog.com

[jaded]

"Redfin finds buyers won’t have much luck trying to low-ball foreclosed homes sold by banks. That’s because lenders these days are already offering foreclosed properties at deep discounts."

We were looking at foreclosures in a gated community in Corona, and consistently ran into lowballing in reverse: a seller (usually a bank) would advertise or post a house as being 50% off the original sale price (i.e, from the 1 millions to $500 k), and then would sit back and wait for a bidding war. Those homes got snapped up, apparently by winning bidders who thought they'd gotten a steal. We got tired of the games and started looking elsewhere.

[Last Laugh]

I've been tracking sold sold homes data record on Redfin and been seeing some nice houses in nice areas going for 100K below the asking price. I mean 3000sqft houses selling for $170 per sqft when the average is more like $250. Most of these properties must have been short sales or REO. Wouldn't this mean that you can lowball banks? Most sellers didn't put much in downpayments in these past 2 years.

[Stacy Tolchin]

There are a bunch of lofts indowntown LA selling for super low rates (200s), some from foreclosure. Given that these places can be rented for 1600+ per month, I was wondering if people think the downtown lofts are good long term investments.

[flip]

if banks are not going to take low-ball offers, that's certainly their choice, but if (or maybe the better word is when) they have a large chunk of foreclosed homes that they need to sell, they're going to be forced to sell them at a lower price. It seems better to slowly lower the price of homes by jettisoning foreclosed homes and forcing sellers to accept the fact that the good times are over.

It seems like some banks are playing a game of chicken. Why not tell shareholders that they have "x loans that are now in default, and based on past projections, we anticipate x more loans to default, and so we'll write off these loans, sell these homes to improve our balance sheet."

Instead, they are hoping for money to fall from the sky or a bailout (I guess there's little difference between the two). By holding this information back, it puts unncessary strain on the system. When they're forced to disclose, it will kill their stock price, and possibly kill the company, and possibly the economy.

Makes no sense.

[Nelcisco]

Dr.Bubble says how we won't hear any mention from the bottom talkers in regard to income from the vast majority of people, just random examples of those in Bel Air, Brentwood, Laguna or Newport which is a tiny fraction of the population.

Well Dr. Bubble, I've been beating this drum ever since I've
been bloging here, others have mentioned it but you're right
it's not mentioned enough, LA is full of people other than 'A' list movie stars, Lakers and Dodgers.

Jobs need to pay more $ across the board or drop house values...PERIOD end of story, unfortunatley, neither incomes are rising fast enough (hell, not all!!)nor are the property values droping fast enough, and until something gives this crisis will be long and painfull.

lets cut to the chase and be pragmatic

[menlo park renter]

Yes, but the report had more useful data for buyers. 10% of sales avg'd a discount of 11% or more, and exactly how much of a discount can you expect to get? And for sellers, it should help raise awareness of how much to cut and negotiate to sell your house.

Avg Seller Price Reductions correlated to Days on Market

< 45 Days = 0-2%
90 Days = 6%
120 Days = 9%
150+ Days = 12%

Avg Discount at Sale compared to List Price correlated to Days on Market
< 45 Days = 0-2%
90 - 180 Days = 3.5 - 4%

[Laker]

Stacy Tolchin wrote: lofts indowntown LA selling for super low rates (200s), ....Given that these places can be rented for 1600+ per month, I was wondering if people think the downtown lofts are good long term investments...."

Stacy Tolchin,
If you buy that loft for $220,000, your 30 yr mortgage would be about $1200 assuming 10% down,
Property tax of about $220 and $100 for insurance. Add to that about $70 that you lose on your down payment sitting dead.
So total is about $1600.
If you can collect $1600 per month, you need to pray that nothing breaks in that place and that you will have a tenant for 12 months of the year...
Anything goes south, and you are in the RED...
In order for it to pencil out, you need to allow 11 out of 12 months rent, and add 2-3% for upkeep as a safe margin.
If it cash flows after all these costs, go for it.

[Laker]

Check out 37701 Janus Dr Palmdale CA 93550
It just sold for $150,000 and if you look back to 2001, it was sold for $119,000.
If you allow 3% of inflation to adjust the 2001 nominal price to 2008 price you will get exactly 2001 "real" price....

This is a beautiful anecdote / example to show that prices of houses is guaranteed to reach 2001 prices.
Palmdale is not Beverly hills, by no comparison. However, during pas decline in the last 100 years, all areas declines by the same percentage pretty much. Rest assured ALL areas of LA are heading to 2001 prices. Thing is that because of demand and mortgage structures as in sub prime vs ALT A / Option ARMS or 2/28 mortgages vs. 5 year teaser rates the high desert area simply are leading the housing corrections. Nice areas of LA are just lagging and will just take more time, but they will end up at the same 2001 prices.
If you are looking to buy, you can pencil this number as the MAXIMUM that you should pay for any property. Add 3% of inflation to 2001 price.
If you want to know the true value, add 3% inflation to the 1998 price - that is the true value/long term valuation of the property.