Discounts in the Teens

Posted by Dave Fratello on Sunday, December 9th, 2007 at 6:49am.

We had two sales close in the last few days in the glutted Tree Section $2m+ segment. Buyers got 14% discounts off the original list prices of both homes.
  • 2310 Palm (5br/3ba, 3150 sq.ft., new) went into escrow shortly after being featured by MBC (see: "The 1-Year Club in the Trees") in late October. But it's not like the home hadn't had exposure before – it was on public offer for 438 days, starting at $2.699m, closing at $2.325m (-$374k/-14%). Last list was $2.399m.
  • 3011 Elm (5br/5ba, 3600 sq. ft., newer) got $2.65m, which is plenty, but here's the thing. It was purchased 2 1/2 years ago – by a pro athlete who has now moved within the Tree Section – for $2.8m. On the face here, the home declined in value by 5% over 30 months. It also dropped 14% (-$445k) from the hopeful price of $3.095m slapped on the listing in early May of this year.
Percentagewise, those sale prices were the second- and third-greatest reductions recorded by MBC in 2007 among Tree Section sales above $2m. The biggest cut was 18% at 2104 Palm, which shot for $3.675m in January and got $3.025m in September.

As to 3011 Elm (pictured), an interesting question arose in comments here at MBC. When it was first sold in July '05 for $2.8m, the home was actually listed for $2.595m. There was a bidding war that resulted in the $2.8m price. So, if it has now re-sold for slightly more, at $2.650m, did it really decline in value over these 2+ years?

Obviously the value of 3011 Elm to a willing buyer did change by 5%. Also, time on market stretched out a bit here – almost 200 DOM this round for the same house that had a war last time.

What's most fascinating is that in the Summer of '05, the list price suggested that the market value was under-estimated by 7%, while in the Spring of '07, the value was over-estimated by 14%.
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