In much of life you get what you pay for — and real estate is no exception.
A review of listings in the 100 largest U.S. housing markets has proven what you’ve probably suspected while browsing through descriptions of homes for sale — those marketed as “bargains” aren’t always the deals they’re cracked up to be.
Research from real estate website Trulia found that in 45 of the markets, listings containing the word “bargain” (or a similar term such as “value” or “deal”) didn’t reflect any discount, on average, over other homes for sale in the market.
That doesn’t mean you can’t find a good deal in these areas. “Rather, it means that there are just as many bargain properties listed for less than the average property as there are listed for more,” wrote Trulia Housing Economist Ralph McLaughlin.
Of the remaining 55 markets where those bargain descriptors more regularly meant something, the discount could be as little as 2.1%.
Bargain listings in Dayton, Ohio, showed the deepest discounts. Buyers there could expect a 19.6% discount on houses that claimed to be great deals. The median listing price was $116,900 in that market; on listings flagged as bargains, buyers could, on average, pay $22,900 less, according to the report. The analysis considered all single-family for-sale home listings on Trulia from January 2013 through December 2015.
Other markets where the word bargain actually meant something: Toledo, Ohio; Knoxville, Tenn.; Buffalo, N.Y.; Omaha, Neb.; Baltimore; New Haven, Conn.; Camden, N.J.; Madison, Wis.; and Fairfield County, Conn., according to the report.
“We wanted to help the young home buyer figure out where they were likely to get a deal on a property,” McLaughlin said in a phone interview. Bargain deals are often especially important to young, first-time home buyers, who may want to find a “livable” fixer upper that they could renovate over time, he said.
The findings are also proof of how sellers — and their real-estate agents — embellish when they’re marketing their home.
“People have to understand they’re dealing with a salesperson,” said Bennie Waller, professor of Finance and Real Estate at Longwood University in Farmville, Va. Agents are “looking to get the attention of a potential buyer, and even if the buyer doesn’t buy that property, maybe they can hook them to buy another property.”
Sometimes, descriptors such as “price reduced” will be slapped on a listing — even if the price has dropped only a couple of hundred dollars — just to catch the buyer’s attention, he said. Yet labels that signal the seller is ready to make a deal, such as “motivated” seller or “bring offer,” often don’t mean that the home’s selling price will be less than the listing price — even though it might spend more time on the market, according to a research paper he co-authored, which used data from a south central Virginia multiple-listing service between March 2000 and February 2009, and was published in the Journal of Housing Research.
That paper also concluded homes could be expected to sell for higher when they had more “factually verifiable” property characteristics in the listing; an extensive list of details may increase the buyer’s perceived value of a home, according to the authors.
“If you want hardwood floors, and [the listing didn’t include that detail], you might overlook it,” Waller said.