By most accounts, the shingle-style mansion at 1655 Bohns Point Road blends in with its neighbors on the shores of Minnesota's Lake Minnetonka. Sure, architecturally the estate looks more Hamptons than Minnesota (it was designed by Robert Lund), but in general it's a quietly elegant 9,700-square-foot manse in a tony neighborhood comprised of other quietly elegant multimillion-dollar homes. There's just one big difference: 1655 Bohns Point Road is bank-owned.
"Somebody is going to get a great value on this, no question, but foreclosures tend to bring out a different type of buyer with a different mindset," says Ellen DeHaven, a Realtor with Coldwell Banker Burnet and the listing agent for the property. "Traditional buyers could be missing a great opportunity because they aren't sniffing around for foreclosures." The mansion was first advertised on the Multiple Listing Service for $11.5 million in 2010. The lender is currently asking $6.25 million, or 46% less. [More from Forbes: In Pictures: Bargain basement mansions]
Foreclosures are somewhat rare at the high end of the real estate market, but the Bohns Point Road listing is indicative of the kinds of bargains that can be had in America's most expensive neighborhoods with a little digging and a nontraditional approach to luxury home shopping.
With the help of Realtor.com, Concierge Auctions and others, we've pulled together a list of posh palaces for sale at prices well below what they were originally listed for. Some are foreclosed, bank-owned mansions; some are listed as short sales; some are headed to non-distressed, luxury real estate auctions; and others are conventional listings for which the price has been heavily chopped by the owners.
Distressed properties offer some of the best bargains. Nationwide, the average discount on bank-owned foreclosure properties is 29%. For luxe real estate the price cut can be even steeper: Last year the La Reve estate in Atlanta sold for about 75% off its initial $45 million asking price and San Francisco's St. Regis penthouse, once listed for $70 million, went for $28 million after it was reclaimed by the lender. [More from Forbes: America's richest neighbourhoods]
Deals like those are likely to continue to pop up. "It [luxury home foreclosures] is a small percentage still, but if you look back over time, it's actually grown as a percentage exponentially," says Daren Blomquist, vice president of RealtyTrac, a foreclosure listing service based in Irvine, Calif. While the tally of distressed properties valued at $500,000 or less ticked down 1% from 2007 to 2011, the number of distressed luxury properties valued at $2 million or more has jumped roughly 765%. "We are definitely seeing more high-end properties continue to fall into foreclosure," he adds.
Nationwide, there are more than 11 million homeowners who are underwater on their mortgages, meaning their homes are worth less than the loans attached to them, according to CoreLogic. And about 1.6 million homes make up the housing market's shadow inventory, or the supply of distressed or bank-owned homes that have yet to hit the market but will.
Among the most enticing bank-owned luxury bargains we turned up is a 13,245-square-foot stone manor in Cherry Hills Village, Colo. The mountain manse, with an artist's studio and geothermal heat, is currently available for $4.6 million, 48% less than in 2008. Also available from a mortgage lender is the Longleaf Estate in Vestavia Hills, Ala., which served as the 2010 "Decorators' Showhouse" for the Alabama Symphony. The 1950s compound includes seven bedrooms, 12 bathrooms, two garages with storage for 10 cars, a covered porch and a pool. It's listed for $2.4 million, a 49% drop from the price tag it toted less than two years ago. [More from Forbes: Cities where real estate is ripe for a rebound]
Short sales are another source of bargains. In Cambridge, Md., a Chesapeake Bay "trophy home" is on the market for $1.3 million, a 63% discount off its 2008 asking price of $3.5 million and "greater than 76% below the actual construction cost," according to the listing. The seven-acre waterfront abode, constructed during the market's peak, boasts four bedrooms, six bathrooms and a third-floor cupola.
When they can't find a buyer by traditional means, some wealthy homeowners with the means to avoid default (strategic or otherwise) opt for non-distressed auctions. This nearly guaranteed sale method has become increasingly popular, particularly among sellers who want a quick end to their suffering after their homes have languished on the market for years.In the suburbs of Dallas, Concierge Auctions will sell off a mega mansion called Champ d'Or on March 30. The 48,000-square-foot house cost $46 million to construct and boasts a beauty salon, a two-story Chanel-inspired closet, a home theater with opera box-style seating and a tea room styled after New York City's now departed Tavern on the Green. After spending nearly a decade on the market, with an asking price of $72 million to start, it will sell to the highest bidder who meets the $10.3 million reserve.
Laura Brady, vice president of marketing at New York City-based Concierge Auctions, says via email, "After advertising a property for 4-6 weeks and allowing all interested buyers to compete, the amount generated is a fair, market-driven price; however, often it is viewed as a great value for buyers." [More from Forbes: America's most amazing high-rise mansions]
Great value, indeed. The company auctioned off the 27,000-square-foot Happy Valley Estate in Scottsdale, Ariz., earlier this year for $5.5 million. The desert manse was originally listed for $35 million four years ago; it would cost an estimated $20 million to build the home today.