Gap Between Last Ask, Sold Price

One clue that a just-sold home had major inspection issues is when the sales price represents a big discount from the last asking price.

So, for example, a house that was listed at $500k, was “Pending” on MLS for six weeks (give or take), then closed for  . . . $380k (or some such).


While I don’t see it that often, every 40-50 sales or so, I come across a closed sale that’s discounted 20% (or more) from the last asking price.*

What’s going on?

Three Theories

One possibility is that the home was egregiously overpriced — and everybody knew it.

So, using the numbers above, fair market value really was around $380k.

Possibility #2:  the home was on the market forever, and the Seller simply capitulated — especially if the Buyer paid cash and was able to close quickly.

However, most Sellers in such a situation — at least if they’re being well-advised and can be patient — would first test an intermediate price before falling on their sword and taking such a hit.

So, you’d normally expect to see a price reduction to $475k for 60-90 days, then $450k, and so on until the house sold.  See, “Nurse!  I Need a Price Reduction, Stat!!”

Possibility #3

Which leaves theory #3:  the Buyer’s inspection turned up a major issue — or several of them.

The potential parade of horribles includes a foundation problem; an improperly installed vapor barrier resulting in mold (more of a risk with recent-vintage stucco homes); friable asbestos that requires professional remediation; abandoned storage tanks (again, expensive remediation); or windows that haven’t been properly flashed (resulting in water intrusion and . . . yup, mold).

When an inspection reveals such a problem, the Seller really only has two options:  1) reach an agreement with the current Buyer to address the issue(s) — usually by reducing the sales price; or 2) lose the current deal, but then have to update their Disclosure to tell all prospective Buyers about the problem(s).

Either way, the Seller is going to take a sizable financial hit — which usually militates in favor of working things out with the current Buyer.

Assuming, of course, that the Buyer wants to stay in the deal.

Fast forward 6-8 weeks, and such a home closes at a price that’s $50k, $100k or even more below the last asking price.

*Twin Cities-wide, the average home is now selling for about 91% of the original list price.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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