Redfin Releases Data-Driven Report for Negotiating a Bargain When Buying a Home

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August 6, 2008

SEATTLE, Aug. 7 /PRNewswire/ — Online real estate broker Redfin today released a research report identifying seven characteristics of homes that sell for a significant discount off the asking price. The report is the latest in Redfin’s “Science of Real Estate” series that analyze proprietary real estate data and academic research to offer homebuyers and sellers practical advice.
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By studying the differences between homes that sold for a large discount and those that didn’t, Redfin was able to develop guidance for when buyers can demand a large discount:
1. Focus on Listings Unsold After 90 Days: Heavily discounted homes are
83 percent more likely to have been on the market for 90 days. Most
sellers will hesitate to accept a low offer if the property has been on
the market for only a few weeks.
2. Focus on Fixer-Uppers: Heavily discounted homes are 73 percent more
likely to be marketed as fixer-uppers. People who sell homes before
fixing them up are usually more concerned about an easy sale than the
best price.
3. Back Off on Remodels: Heavily discounted homes are 20 percent less
likely to feature a noteworthy remodel. Redfin expected the reverse:
that sellers who invested in a remodel would have unrealistic
expectations about their home-value built into their asking price,
leading to discounting down the road.
4. Don’t Be Put Off by a Price Reduction: Heavily discounted homes are 28
percent more likely to have already been price-reduced. Together with
long days on market, price reductions are likely to increase a buyer’s
bargaining power.
5. Look for Homes Owned a Long Time: Heavily discounted homes are 52
percent more likely to have been seller-owned for 20 years or more. The
longer a seller has owned a property, the more equity he has likely
accumulated, and the more likely he is to make significant price
concessions.
6. But Don’t be Put off by Flips Either: Heavily discounted homes are nine
percent more likely to have been seller-owned for less than five years.
A seller in trouble on his mortgage may be motivated by his need to
quickly reclaim capital.
7. Don’t Expect Banks to Negotiate Much: Heavily discounted homes are nine
percent more likely to be a short sale or bank-owned. Redfin expected
to see far more bargaining in distressed properties, but the data
suggest that selling banks already had priced homes low to avoid
bargaining.

“Homebuyers have begun crawling out of their bomb shelters hungry for big discounts off the asking price,” said Redfin CEO Glenn Kelman. “Often, their expectations are unrealistic, as many sellers have already aggressively priced their homes. But when conditions are right, we’ve found that a small but significant number of sellers concede $50,000 or more at the negotiating table. We’ve tried to take the mystery out of when a seller will give ground and when she’ll stand firm.”
Methodology
To evaluate sellers’ willingness to bargain, Redfin analyzed 9,053 single-family-home sales in Los Angeles (California), Fairfax (Virginia) and King (Washington) counties between April 15, 2008 and June 15, 2008. Redfin assembled this data from public tax records and the broker-only databases known as Multiple Listing Services (MLSs).
Redfin compared transactions that sold for a large discount, where the size of the discount was in the top ten percentile for that county, and those that didn’t. The average large discount was 11.4 percent off the asking price, whereas the remaining 90 percent of sales averaged a discount of 1.5 percent, for a combined average of 2.5 percent.
The full report, with detail on each county and a complete methodology, is available at .
About the Science of Real Estate
Redfin’s research on discounting is part of a series of papers and blog posts by Redfin that the company promotes as a more data-driven approach to buying and selling real estate. To develop near-real-time, data-driven guidance for real estate consumers, Redfin analyzes:
— the MLSs brokers use to share listings;
— the logs of Redfin’s popular real estate search site, Redfin.com; and
— the research of academic economists.

Redfin already has published research on:
— April 2008: The characteristics of listings that sell in seven days or
less.
— March 2008: The relationship between commissions and sale-to-list price.
— December 2007: Tactics for marketing listings to sell quickly, at a
high price.

A summary of our research is also available at .
About Redfin
Redfin () is the real estate industry’s first online brokerage, currently available in the Boston, Chicago, Los Angeles, Orange County, San Diego, San Francisco Bay, Seattle and Washington, D.C areas. Redfin combines the best real estate search site with local, experienced real estate agents. Redfin.com’s map search displays the most homes for sale and information about those homes. Customers who use Redfin to buy or sell properties earn a refund of most of the commission traditionally due their broker, and get full support in paperwork, offer presentation, negotiations and closing. Redfin has the highest customer satisfaction rate in the industry — 96 percent, and is the only brokerage with a 100-percent-customer-satisfaction guarantee. To give the Redfin service a try, visit ; to keep track of our daring exploits visit our blog at blog.redfin.com, or our customer message boards at forums.redfin.com.

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