When to believe real estate agents who say you're getting a great deal

Real estate agents are known for employing euphemisms to make an outdated house seem charming, or a cramped apartment feel cozy.

Here are some other buzzwords: “bargain,” “under-valued,” and “deal.” In nearly half the largest 100 U.S. metros, those phrases probably mean absolutely nothing.

So says fresh research from Trulia, which compares the listing prices for homes marketed as good deals to the prices for homes of similar size, age, and location. In San Francisco, Atlanta, and 43 other metropolitan areas, homes listed as good values weren’t any cheaper, on average, than similar homes whose listings didn't promise a deal. In some cities, you may have more luck taking bargain-shilling brokers at their word. Homes advertised as bargains in Dayton, Ohio, were, on average, 20 percent cheaper than homes in the same zip code after controlling for the number of bedrooms, bathrooms, square footage, and lot size.

There are some limits on what the Trulia study can tell us. The research describes the average discount across metropolitan areas, and it doesn’t gauge such factors as the quality of amenities or location within a zip code. A bargain, on some level, is in the eye of the beholder.

Still, it's not entirely shocking to learn that you can’t believe everything you read in a for-sale listing. Here’s the interesting dynamic: In markets with a large inventory of homes for sale, sellers need to offer discounts to attract interest in homes—particularly those with some sort of defect. “In hot markets, sellers don’t need to do a lot or make big price adjustments for perceived defects,” said Ralph McLaughlin, an economist at Trulia.

But just because sellers aren’t offering discounts doesn’t mean they’re not advertising them. In Wilmington, Del., where there was no real discount for so-called bargain homes, 2.1 percent of sellers promised a good deal, which tied for the highest percentage in the Trulia study. In 21 out of the 45 cities in which "bargain" homes offered no discount against comparable listings, at least 1 percent of sellers promised a good deal.

Across the 100 largest U.S. metros, 1 percent of listings advertised a bargain in 2015, according to Trulia’s research, down from 1.5 percent in 2011.


Patrick Clark
Bloomberg News

Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate

Investment Hot Spots:
Lakeside, Argyle, St. Davids, Richibucto-Village, Lake Ramsay

COMMENTS

Get help choosing the best mortgage rate

Just fill in a few details, and we'll arrange for a Mortgage adviser to help you find the best mortgage for your needs

  • How soon do you want a mortgage?
  • Name
  • Where do you live?
  • Phone number
  • E-mail address

Poll

Have your investment plans changed for 2017?