Why Some Home Sellers Discount The Price Of Their Homes

Most price reductions that the Surf City Guru has seen recently have been associated with one of the following conditions or situations:

1. The seller has a large amount of equity, is retiring and moving out of state or to a more affordable smaller home. Unless they’re strapped for cash, most senior sellers would rather move on with their lives as soon as possible by discounting the price of their homes just enough to sell it.

2. The seller is being forced to relocate by an employer and cannot afford to keep their current home. Some employers don’t offer relocation assistance or packages to employees. When a seller must report to their new job in another state, selling their current home quickly becomes a necessity; henceforth, they may offer a modest price reduction to get the home sold.

3. Sub-prime loans with automatic escalating interest rates and repayment schedules. Many sub-prime home loans where established here in O.C. In most cases, the homeowners will be able to tighten up their budgets and reduce spending enough to continue making timely home loan payments until the market improves.


However for those who have had unexpected financial losses, the time bomb is set. Unexpected things like major medical bills, legal expenses, divorce, unemployment, physical or mental disabilities, will eventually cause more short sales and some foreclosures, especially if the owner does not seek immediate professional guidance. Naturally, those who fraudulently obtained sub-prime home loans may end up losing their homes when payments rise over time and their ability to make higher payments does not keep pace. Keep in mind that just because one home in a neighborhood sold for less money, this does not set a new base price for the entire neighborhood. The seller may have taken a lower price due to one of the above stated reasons or it could have had deferred maintenance issues that justified a lower price.

Help! Help! The Prices Are Falling!

The local and national media, A.K.A. Chicken Little, continues to use sensational statistics, half truths and complete exaggerations to create fear or perhaps to validate their recent doom and gloom predictions for the Orange County residential real estate market. Recently the media reported a 600% increase in L.A. and Orange County Home Foreclosures. At first glimpse this sounds like a huge increase. However, the actual number of foreclosures last year was not very sensational, so this detail was simply left out of their report. At the extreme, the Surf City Guru anticipates only a few hundred more L.A. and Orange County homes will actually be foreclosed upon this year. This should have little impact upon home prices. Most properties with a notice of default will continue to be sold before actual foreclosure. Some of them will be sold through short-sales; however lenders are not expected to allow much discounting in the near future.