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Down and Out in Beverly Hills?

Not quite, but even L.A.'s top high-end Realtors are having a harder time selling luxury homes this year

Beverly Hills Realtor Sally Forster Jones is trying to win over a new client by cutting right to the most important point of the sale—the price. "The house is worth two-ish," Jones says, meaning $2 million. Jones explains that the client could list the home for $2.29 million, but then risk having it sit on the market for months. If the asking price is $1.99 million, "that sounds like a deal," Jones says. The seller should get multiple offers, and the winner will be less likely to seek concessions after the inspections. "The lower end will be a better experience," Jones says.

Such is the new reality of the real estate business, where even in Beverly Hills, settling for less has become a fact of life. In 2006 Jones was the top producer for Coldwell Banker in Los Angeles, selling over $160 million worth of properties. During the boom, she had clients buying houses sight unseen. One home got 70 offers. At "twilight openings"—evening open houses where agents show off new listings—there were fancy catered feasts, open bars, and live music. Now, Jones says, it's "cheaper champagne."

Like the rest of the country, higher-end properties are holding up better than lower-end ones in Los Angeles. Homes there priced above $700,000 fell 4% in the past year, according to the Seattle-based Web site Those priced below $380,000 fell 14%. Travel farther away from the city, to bedroom communities in Riverside and Ventura counties, and prices have fallen 20% or more in the past year.

Tuesday Is Caravan Day

The cheaper dollar has helped somewhat. Hilton & Hyland broker Aaron Kirman says half of the eight homes he has in escrow were sold to foreign clients. But ultimately it's the pleasant climate and geography that still make L.A. a draw. "There's only so much ocean," says Delores Conway, director of real estate forecasting at the University of Southern California.

Touring properties with Jones and her Coldwell Banker colleague Karen Norris, one can see how the market is changing. Tuesday is the day agents reserve for the weekly ritual called the "caravan." It's when the listing agents show other agents properties they will offer to the general public over the coming weekend. A broker for some 30 years, Jones knows the streets so well she doesn't bother to use the navigation system in her black Mercedes.

The first stop is a five-bedroom, Spanish-style home in the flat part of Beverly Hills, practically within walking distance of City Hall and Rodeo Drive. It's listed for $4.5 million, but even at that price it needs some remodeling: updating the maroon bathtub, for example, or the dark kitchen cabinets. Jones wouldn't advise the seller to make such changes, though. Buyers, she says, want to put in their own touches. And in this neighborhood, Jones says, "You're buying the street."

The $19.9 Million Teardown

Next comes a 7,400-sq.-ft., four-bedroom Mediterranean-style mansion in the Holmby Hills neighborhood of Los Angeles. It's got a circular driveway, a billiard room, and trellised gardens. There are some negatives. You can hear traffic from nearby Sunset Boulevard in the backyard. Built in 1988, the house, says Jones, "is not new and not old." That means it will need updating but doesn't yet have the prestige of an older house. "It's the unique properties that are selling," Jones says. "Anything with a flaw gets less attention." This house was originally listed for $12 million; now it's $9.99 million.

The tour continues to a five-bedroom estate perched on a hill in Bel-Air. It is 55,000 square feet of property with magnificent views of the city below. The sellers and their listing agent didn't bother staging the empty home with furniture. The quirky stone design of the house defies easy architectural classification. Jones doesn't look around much and instead heads straight to the kitchen where Chinese chicken salad is being served. "It's a teardown," she says. The asking price is $19.9 million.

Knocking Off the Millions

Jones has the listing for a new home, rebuilt from the foundation up by investor Vilma Hood, who has remodeled three other houses in recent years. The seven-bedroom estate is located in Brentwood, a neighborhood popular with celebrities. Jim Carrey and Ben Affleck live nearby. Nicole Kidman just bought a few streets over. The Mediterranean-style home manages to appear spacious and cozy at the same time. It has pantries coming off the pantry, natural stone in the bathrooms, and a walk-in closet off of a guest bedroom.

It isn't selling, though, and Jones convinced Hood to knock the asking price from $8 million to $6.5 million. "I don't understand it," Hood says. "Everyone who sees it says they love it." At the new price all agree there should be some interest. Norris volunteers to work the open house on Sunday.

Click here to read more about how luxury real estate is faring in today's troubled housing market.

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau .

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