The rate of discounts to listing prices in the Seattle area during the last quarter puts the region squarely in the middle of a national trend. Here, pricey Mercer Island has seen the biggest price cuts.

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Clued-in buyers and sellers know a home’s price may need to be reduced to land a sale during these difficult times.

But who knew that four in 10 Seattle-area homes would be discounted — and that some discounts would cut $100,000 off the asking price?

That’s what happened last quarter, according to Zip Realty, a national real-estate brokerage, which analyzed home-sales trends for July through September in a report released this past week.

Moreover, discounts were available in every ZIP code save five in the greater Puget Sound area; most cuts were in the 1 to 5 percent range.

The deepest were in pricey Mercer Island, where, on average, homes sold for 91.8 percent of their list price. In dollar terms that dropped the average listing price from $1,421,312 to $1,304,514. That’s $116,798 off — enough to buy a new Mercedes-Benz SL 550 convertible.

Conversely in the South King County city of Covington, buyers paid an average 101.3 percent last quarter, meaning they bid up the average listing price of $338,803 by $4,314.

The company provided no analysis of why prices changed as they did in each area.

It presented averages, which are easily skewed by one or two sales with huge price differences, instead of median prices, which are a more accurate reading of the market when prices vary greatly.

Zip Realty, headquartered near San Francisco, analyzes data from the multiple-listing services in the 35 cities it serves to give customers and the public a sense of where the market is and where it’s heading, said Leslie Tyler, Zip’s vice president of marketing.

Zip found that the percentage of Seattle-area homes experiencing price cuts is growing slightly, from 40.4 percent in the third quarter 2007 to 43.3 percent last quarter.

That puts Seattle squarely in the middle of the price-cut pack, Tyler said, far below Tucson and Orange County, Calif. They’re tied for first with an average 49 percent reduction from listing to selling price.

At the bottom is Denver. About 29 percent of homes in the Mile High city were discounted for a sale.

Gary DeRosa, a Seattle-area Zip agent, says there are many reasons behind price cuts.

Homes that aren’t in top shape often are slow to sell.

“Buyers know there’s something better out there,” DeRosa said. “Then you’ll have to either fix it up or reduce your price.”

If a neighborhood has too many similar for-sale homes, the competition for buyers will force discounts, DeRosa said.

So will foreclosures. A neighborhood heavy with bank-owned homes will depress the prices of the other for-sale homes.

But the biggest reason for price declines, DeRosa said, is listing a house too high initially. If sellers “price it wrong, they lose that little window of opportunity” then must cut the price to attract a second round of interest, he said.

Zip’s third-quarter report also revealed that Seattle had one of the biggest inventory increases among the major metro areas.

The number of homes for sale here has increased 8.8 percent from the same quarter last year. That put it behind Salt Lake City, which saw for-sale inventory increase 13.2 percent.

Conversely, Orange County saw the number of for-sale homes shrink 28.9 percent, while Las Vegas was down 23.7 percent.

“One of the biggest reasons the Seattle inventory is increasing is [that] Seattle hasn’t seen the price declines Southern California has,” Tyler said.

“More Seattle sellers are willing to put their homes on the market thinking prices will increase or at least stay steady.”

In Southern California, sellers aren’t thinking the same way.

Elizabeth Rhodes: erhodes@seattletimes.com