'Deal Or No Deal' game of finding housing bargains

November 14, 7:21 PMReal Estate News ExaminerBroderick Perkins

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In a market where foreclosures have soared and home values have slipped, you'd expect to find discounted listings around every corner.

Not even in a buyer's market.

Finding real deals requires a closer look at certain identifiers that indicate a home is either already discounted or a likely candidate for price slashing.

Taking some of the guesswork and legwork out of finding bargains among homes for sale, Seattle, WA-based Redfin, an information technology real estate brokerage analyzed thousands of single-family-home sales from three counties -- Los Angeles, CA; Fairfax, VA; and King, WA.

The online real estate brokerage examined the differences between homes that sold for a large discount and those that didn't and came up with some guidance to help buyers zero in on marked down properties and cozy up to sellers more likely to negotiate.

Redfin's findings aren't carved in stone. Buyers still have to be wise to local market conditions, value trends and sellers' attitudes in both the conventional market and the distressed properties sector. The online realty firm's findings are best used as an adjunct to other conventional comparison shopping strategies.

With that disclaimer, here's a snapshot of what Redfin found.

$$$ Hone in on languishing listings. In a healthy market, listings that languish unsold often become shunned by buyers who believe the long unsold status indicates some hidden problem. But Redfin found in the current market, heavily discounted homes were 83 percent more likely to have been on the market for 90 days or more compared to homes that weren't discounted. Still don't over look a property's condition to determine how well it, and it's value, will hold up over the years.

$$$ Seek homes simply priced to move. It sounds like a no-brainer, but if the price has been reduced for whatever reason, compared to like homes, even if the home hasn't been on the market long, chances are it's a good deal and an opportunity to bargain further. Again, you won't know if it's a good deal if you don't know the recent selling prices of similar homes in the area.

$$$ Consider fixer-uppers. Redfin said heavily discounted homes are 73 percent more likely to be marketed as a fixer-upper or as an "as-is" property, than properties that weren't discounted. Many sellers who don't bother to fix up before they sell are often after an easy sale rather than the highest price. Of course it's still up to the buyer to know just was the "is" is in as-is. A home inspection remains paramount.

$$$ Banks are tougher to negotiate with, but that's often because their repossessed properties are already priced to sell. Heavily discounted homes are 9 percent more likely to be a short sale or bank-owned, than properties that weren't discounted. A bank-owned property may be a better deal than a short sale because short sales often remained tied up in negotiations with the seller. Even though they once lobbied Congress to get into the home selling business, banks have learned the hard way to "Be careful what you wish for," and just want to unload all those distressed properties.

$$$ Look for listings that belong to long-term owners, but beware of the Catch-22. Heavily discounted homes are 52 percent more likely to have been seller-owned for 20 years or more, compared to those without discounts, says Redfin. The longer a seller has owned a property, the more equity he or she has likely accumulated and maintained even after a downturn. That makes him or her more likely to make price concessions. On the other hand, long-time owners who are banking on their home equity for retirement aren't going to sell it for a song.

$$$ Find flips. Flipped properties are typically those purchased and perhaps cosmetically improved and upgraded somewhat to turn a profit with a quick sale -- say in six months to a year. However if the investors' strategy to flip for fast appreciation gains was snagged by the market downturn, the owner may be in financial trouble and motivated by his need to reclaim some capital. Heavily discounted homes are 9 percent more likely to have been seller-owned for less than five years, than properties that weren't discounted.

$$$ Don't expect to find heavy discounts on heavily remodeled homes. Sellers who plowed remodeling cash into their home want their money back and often hold out on lowering the price. Heavily discounted homes are 20 percent less likely to feature a noteworthy remodel, compared to homes that weren't discounted -- the opposite of what Redfin expected. There's a message here for sellers. Don't plow remodeling money into the home shortly before listing it unless the market will support it.