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).
Ouch!
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.
