Deep Discount in South Tyrol Hills

50% Off Original Ask

There may be another home in the Twin Cities that's been on the market longer, or has been discounted more from its original asking price than this one.

But if so, I'm not aware of it.

Originally listed at $1.395M in September, 2007 (yes, that's 32 months ago!), this postcard-pretty 1937 home -- located in Golden Valley's South Tyrol Hills neighborhood -- is now asking $699.5k.

Now that's patience (or stubbornness).

So, is it finally a bargain?

Who wants to know??

Deal . . or No Deal?

Submit Your Offer . . . Then Wait (and Wait)

Where: 29xx Ewing Ave. South, in Minneapolis' Sunset Gables neighborhood (just southwest of of Cedar Lake)
What: 1932 Tudor with 4 BR/4BA and 3,400 FSF
How much: $425k list price
Tax assessed value: $547.5k
When: went pending 7/21/09

Yes, the Kitchen was a bit dated and the home had some deferred maintenance. And the backyard was mostly eaten up by driveway. But this handsome, rock-solid 1932 Tudor just southwest of Cedar Lake had tons of period detail, 4 large bedrooms up (a rarity), and a particularly large Master Suite.

Factor all that in, and the asking price was easily $100k low.

What happened next?

The predictable "foreclosure feeding frenzy."

Scuttlebutt was that there ultimately were at least ten offerors on this home, who then had to cool their heels the next two weeks as the listing agent continued to show and market the home.

How much behind-the-scenes maneuvering do you think was going on in those two weeks?

How much do you want to bet that whatever discount there may have been originally was whittled down (or eliminated) during that period?

"First Come, First Served" -- Not

I'm certainly not a boy scout, and see nothing wrong with maximizing the owner's selling price -- after all, that's what Sellers pay their Realtors to do.

However, as remarked on this blog previously many times, the foregoing "sales strategy" -- vs. a more open, timely and fair approach -- leaves many Buyers feeling manipulated and cynical about how the real estate business works.

At least with respect to this corner of it, you'd be hard-pressed to argue that they're wrong.

P.S.: So, the Seller was someone who foolishly overpaid at the top of the market and got what they deserved, right? Not exactly. According to tax records, they bought in 1991 for $236k. You'd guess that they took out equity by borrowing against the home, then fell behind.

Sadly, this scenario appears to be increasingly common these days.

Price Reductions: A Realtor's Take

Cheaper -- Not Necessarily Cheap

In a recession, everyone's looking for a sale. So it stands to reason that a home that has just had a big mark-down is a deal, right?

Not necessarily.

Simply knowing that a home that used to be "X" is now $10,000 less -- or $50,000 -- really tells you nothing, for the obvious reason that the original asking price may have been inflated. All you can confidently say is that the price is now "better" (in fact, the preferred Realtor term for a price cut is "price improvement").

In my experience, some of the homes touting the biggest price drops are precisely the ones that were most overpriced initially.

Looking for Patterns

So what does a price cut -- or series of them -- tell you?

Mainly, how motivated and realistic the Seller is.

A home that has been on MLS at the same price for 60 days-plus is almost certainly too high (the exception being an upper bracket home, which has a longer expected market time).

At that point, most serious Sellers will entertain anywhere from a 3% - 5% price cut.

If their home doesn't sell in the next 60 days, they'll take another price. Wash, rinse, repeat until sold.

So when you see a home sitting at 187 days with no price reduction, you know something's up.

Similarly, when you see a home that took a price cut at 60 days, and another at 120 days, and it's now at 179 days . . . you'd guess that an attentive Buyer is going to factor a third price cut into any offer they make.

"Frozen in Amber" Homes

What Does Tax Assessed Value
Say About Market Value?

In a Buyer's market like today's, more and more listings announce that the home is "selling for less than tax assessed value" -- sometimes substantially less. The inference is that the home is a bargain.

Is it?

Not necessarily.

One situation where tax assessed value can be well above fair market value is when the Seller has been in the home for decades.

While their neighbors have been steadily updating and renovating over the years, the long-time homeowner has stood pat. So, thirty years later, the kitchen, mechanicals, and decor are all quite dated.

Even worse, the floor plan and amenities may be obsolete. The upstairs may only have one, hallway bath; if the home has hot water heat, switching from window a/c units to central air may be prohibitively expensive; and the one-car garage that was fine 30 (or 70) years ago just doesn't cut it.

Unfortunately, to the tax assessors most of these lagging characteristics seem to be invisible. They assume that the housing stock in a given area is relatively consistent, and as the neighboring homes change hands at ever-rising prices, the tax assessed value of the "frozen in amber" home rises, too.

Over time, the gap between the tax assessed value and fair market value of such a home can become increasingly wide.

I've personally seen instances recently where the tax assessed value was more than 20% too high. And that was for homes that weren't foreclosures or short sales!