Where bargain homes really are a bargain

When promised a bargain, most people assume they're getting a product at a discount. But that's not necessarily true when it comes to buying bargain real estate. In fact, in 45 of the 100 largest housing markets, homes that are described as bargains typically sell for every bit as much as comparable homes in the same neighborhoods, according to a recent study.

In 55 of the nation's top housing markets, however, the term "bargain" has real meaning, indicating that the price has been slashed by anywhere from 2 percent to 20 percent, resulting in savings that average as much as $55,000, according to new research by real estate shopping website Trulia.

The cities where "bargain" homes provide the steepest discounts are heavily concentrated in the Midwest and South, according to the site's research. Dayton and Toledo, Ohio, win the dubious distinction of offering the steepest discounts for bargain priced homes -- 19.6 percent and 18.1 percent, respectively. (The distinction is dubious, Trulia experts note, because it reflects softer housing markets, where buyers, rather than sellers, call the shots.)

Knoxville, Tennessee, comes in third, with discount properties selling for 12.8 percent less on average than comparable homes in the same neighborhood. Buffalo, New York, and Omaha, Nebraska, round out the top five, with discounts of 12.4 percent and 11.5 percent, respectively.

However, housing costs in all of these steeply discounted markets fall below the national norms, so even though the discounts are big in percentage terms, the dollar savings are greater in other markets. In Fairfield County, Connecticut, for example, bargain-price listings sell at about a 10.4 percent discount to market norms. However, with the median home price at $535,000, this discount translates into an average savings of $55,000.

Likewise, the 8 percent discount on bargain real estate translates to a $37,801 markdown on properties in Silver Spring, Maryland. It comes to a $41,270 discount on properties in Honolulu, Hawaii, where the median home price exceeds $700,000.

However, before you hop on a flight to pick up a little bargain property in Hawaii, it's worth mentioning that shopping for discounted homes isn't like going to the Macy's white sale. Whereas you can be relatively sure that your pima cotton sheet set is just the same when it's 30 percent off as when it's retailing for full price, bargain real estate is usually marked down for a reason, said Ralph McLaughlin, housing economist at Trulia.

Whether it's because the house is poorly laid out, needs repair or is just a cosmetic fixer, houses tend to get marked down because something is amiss, he noted.

To truly get a bargain, you need to identify the problem and determine whether it's one you're comfortable living with or if it needs to be fixed. If it's a fixer, you'd be wise to walk the property with an appraiser or contractor to get an estimate for what the repairs might cost. After all, even a $55,000 discount on the sales price is little help for a home needing $100,000 in repairs.

That said, in hot housing markets such as Los Angeles and San Francisco, you don't get much of a discount even when you're buying a fixer, said McLaughlin. Trulia's research found that differences in median home prices of houses labeled as "bargains" didn't amount to enough to get past a statistical margin for error in 45 major markets, including these two.

Where does the term "bargain" actually get you a lower price for real estate and how much might that discount save you? Here are the 10 markets with the biggest percentage savings and the 10 with the biggest savings by dollar value, according to Trulia's study, which gathered data on sales in the 100 largest residential real estate markets, adjusting for home size, lot size, number of bedrooms, baths, age and ZIP code. Results were trimmed to reduce the impact of outliers.

Markets offering the biggest percentage discounts

1. Dayton, Ohio -- 19.6 percent; total savings $22,900 on the median sales price of $116,900

2. Toledo, Ohio -- 18.1 percent; total savings $19,848 on the median sales price of $109,900

3. Knoxville, Tennessee -- 12.8 percent; total savings $21,831 on the median sales price of $169,900

4. Buffalo, New York -- 12.4 percent; total savings $17,186 on the median sales price of $138,888

5. Omaha, Nebraska -- 11.5 percent; total savings $18,267 on the median sales price of $159,000

6. Baltimore, Maryland -- 11.3 percent; total savings $29,857 on the median sales price of $265,000

7. New Haven, Connecticut -- 11 percent; total savings $27,543 on the median sales price of $249,900

8. Camden, New Jersey -- 10.5 percent; total savings $20,982 on the median sales price of $199,900

9. Madison, Wisconsin -- 10.5 percent; total savings $25,062 on the median sales price of $239,300

10. Fairfield County, Connecticut -- 10.4%; total savings $55,593 on the median sales price of $535,000

Markets offering the biggest discount in dollar terms

1. Fairfield County, Connecticut -- $55,593 (10.4 percent)

2. Honolulu, Hawaii -- $41,270 (5.9 percent)

3. Silver Spring/Frederick/Rockville, Maryland -- $37,801 (8 percent)

4. Newark, New Jersey -- $36,663 (10 percent)

5. New York, New York -- $35,822 (9 percent)

6. Oakland, California -- $34,685 (5.7 percent)

7. Cambridge/Newton/Framingham, Massachusetts -- $30,848 (6.9 percent)

8. Baltimore, Maryland -- $29,857 (11.3 percent)

9. New Haven, Connecticut -- $27,543 (11 percent)

10. Boston, Massachusetts -- $27,405 (6.9 percent)