Yes There Are Discounts

By Dave Fratello | June 4th, 2013

This is not exactly a market where people are bargain-hunting. Not in the first half of 2013.

But there are chances to make deals below the listed retail price. Just start with a list price that's too high, and watch the drops come when buyers make their case to the sellers.

An impressive example of a quick discount taken was over at 514 N. Dianthus (6br/5ba, 3700 sq. ft.), a corner-lot house that felt, frankly, unusual for the Hill Section when we toured it.

It "felt like" a Tree Section house, probably owing to the 40-foot wide lot. This creates a fairly narrow house for the Hills, but beyond that the home was outfitted like a luxe Mediterranean, and quite smashing attractive. (With a larger-than-Tree-Section-size lot at 5500 sq. ft., the house could be bigger and a nice backyard preserved.)

Thinking they had something super-special, the sellers put this out at $3.150M.

Now, there are $3M homes all over the Hill Section, but that's not how this one penciled out. We brought clients through at the first brokers' open and conveyed our first impression: This is more like a $2.8-ish house, and they'll need some time to figure that out.

The listing never took a public price cut, but had a deal at 5 weeks.

When the sale posted recently, we were sincerely impressed by the position that the buyers brought the sellers to: A closed price of $2.700M.

That was a chop of 14% off the top, or $450K. And it was somewhat better than what we had guessed to be the market value.

And the sellers got there without running 6 months on market, enduring weeks with no showings, dithering through a string of partial price cuts – all the malaise that seems to descend upon an overpriced listing.

It just took 5 weeks and one buyer.

More typical of the slow burn of a badly priced listing: 421 32nd Place, a very small house (2br/1ba, 725 sq. ft.) on a half lot on an alley.

For reasons known only to the sellers and agent and their god, they launched this one at $1.299M in January.

It was radically out of kilter. There are fully modern homes on similar half lots in the area selling at that price. (Take 445 29th Place, now in escrow with a list of $1.349M, as an example.)

The first correction came a month into the listing, "down" to $1.199M. A week later, $200K more came off the top.

By April 1st, it was no joke anymore – the list price was down to $875K.

Last week the sale settled at $825K, with 139 DOM in the books.

If you measure against the lofty heights of that preposterous start price, that's a whopping 36% discount.

If you measure only against the past sale, it's a little bump up. The sellers paid $775K in April 2010, and now got out at $50K more – just enough to pay the agents on both sides.

Cautionary note: We see lots of resales of properties last traded in 2009-2011 that are going for much more than their acquisition prices, hinting at the rise of the market since those down years. We're speculating that 421 32nd Place may have sacrificed some gains by overpricing so badly right out of the gates.

Our last example will be 320 32nd (4br/4ba, 4300 sq. ft.), a newer (2001) build with huge ocean views and a familiar layout – 4br together on the midlevel, living spaces up top and an entertaining room downstairs just off the walkstreet.

The discount here may not be so shocking, but the story's good.

First, we'll just note that we had good conversations with the sellers before they spoke to (other) agents while they were trying to decide whether to sell. Dave offered an opinion of a range in which the property was likely to sell, and the sellers later went ahead to market. (They had wanted to be sure they'd get back the $2.7M they had paid in Oct. 2011.)

Dave's last bit of advice: This is very likely to trade at $3.100M, the high end of the range we had first suggested.

The listing, run by another agent, came out higher, at $3.299M. There was no rush of offers, though, and the listing hung around for 5 weeks at time in February/March when everything else was selling immediately.

And then along came a buyer who made the right deal: Exactly $3.100M, in a sale that took a while to close, but did seal up in mid-May.

Again: 5 weeks, one buyer.

So that was $200K off the top, or 6% fat shaved off, without too much waiting or repositioning.

The buyers figured out the right number and made their run, irrespective of the public list price.

And that turns out to be good advice.

As sellers get ambitious in this market, buyers need to recognize their power, make their case and try to make their best deal possible, regardless of what the pricetag says.

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