Which would you prefer?

First off...very interesting article over at the NY Times with the headline "A Reality Check for Home Sellers." It discusses the reasoning behind some sellers' refusals to lower prices in a correcting market, and compares the phenomenon to the 1990s condo bust in Boston.

There's also a new element on the blog - the "Realtime chart of the day," which is on the right side of the blog, just below RSS. This will be changed constantly to provide market updates on various South OC cities. Now, on to the post...

Two Rancho Santa Margarita properties are for sale that are identical in size and virtually sit next door to each other. Here are the details:

Property 1:
17 Rana, Rancho Santa Margarita, Calif., 92688
Size: 3 beds, 2.5 baths, 1,824 sq ft (built in 1987)
MLS: S505077 (11 days on Redfin)
Asking price: $659,900
Asking price/ sq ft: $362
Purchase price: $257,000
Purchase date: 7/21/1998
Lot size: 6,240 sq ft
Zestimate: $686,306
2006 property taxes: $4,232.00
HOA dues: $46.00
From listing: Great interior location with a LARGE BACKYARD! Good size living room, dining room & family room with an attractive fireplace. GRANITE counters in the kitchen. FRENCH DOORS opening up to a park like rear yard. Large secondary bedrooms with a spacious master bedroom suite & large walk-in closet. A low monthly association of $46.00 provides you with access to pools, tennis & parks. Seller is relocating & will entertain all offers!

If we assume there weren't psycho home equity line of credit extractions taking place, this owner should be in a decent position to cash out with some nice gains. If they can sell the house at this price, the profit would be $363,306, assuming 6 percent selling costs.

However, the fact that the "seller is relocating & will entertain all offers!" makes it sound like the seller really wants to sell sooner rather than later. Still not a big problem in case they have to lower the price significantly, considering they should have plenty of equity on hand. The big problem is finding a buyer. Is it time to start lowering the price? Take a look at a potential comp buster and see for yourself:

Property 2:
2 Danta, Rancho Santa Margarita, Calif., 92688
Size: 3 beds, 2.5 baths, 1,824 sq ft (built in 1989)
MLS: P597379 (25 days on Redfin)
Asking price: $599,000
Asking price/ sq ft: $328
Purchase price: $700,000
Purchase date: 5/10/2007
Lot size: 7,000 sq ft
Zestimate: $705,341
2006 property taxes: $4,759
HOA dues: $46
From listing: Pre-Foreclosure short sale-Highly upgraded interior corner location. Extensive hardscaping including in ground spa. Former model with all the upgrades makes this home stand out! Gourmet style kitchen w/ granite, stainless appliances, breakfast counter bar, gorgeous cabinets with bubble glass is a showcase! Also included: high end distressed wood flooring, custom plantation shutters, fch door off family rm, ceiling fans, upgraded lighting fixtures & newer paint. Selling in an 'as is' condition

Extremely quick turnaround from the latest sale in May to pre foreclosure in September. If the current owner gets full asking price, the loss will be $136,940, including 6 percent selling costs. To translate: this selling price would equal a decline of about 14.4 percent in less than five months.

Also don't overlook potential dark horse 16 Mapache. This property is just around the corner and is a bit larger than our other two properties at 1,977 sq ft - lot size is the smallest, though. It does have an extra fourth bedroom. Price: $631,500 ($319 per sq ft). Original asking price of $675,000, but it's already seen four price reductions. Last sale: $467,500 in December 2002. Days on Redfin: 39.

So, which of these would you take if you decided to buy one? If you can handle a pre-foreclosure, as-is sale, you would save an easy $60,900 if both of the three-bedroom properties went for the full asking price. There's no reason at all to take 17 Rana, then, because even if you didn't want 2 Danta, you could save $28,400 by going with 16 Mapache's full asking price. You'd also get an extra bedroom in the process.

Not even the "park like (sic) rear yard" you can get with 7 Rana would do enough for me to overcome the difference in price when you consider how similar the properties are.