Lexington & The Low-Ball Offer: Working or Not?

I have been getting some crazy stupid low offers on my listings lately.  The kind that are so low that the house would probably sell for more than what was offered if it were a foreclosure.  Since everybody wants to feel out the sellers these days, you never know if the buyer is going to get real or if they are just going to waste half of your day.  I recently got an offer from an agent who told me his buyer had seen over 40 houses before making the low offer on my listing. We’ve given him our bottom dollar and they keep coming back with their final offer…….I haven’t been so annoyed at hearing the word “Final” since they canceled Who Wants to be a Millionaire.

So, since there is ice covering everything today and my plans to show houses were prevented, I thought what a great opportunity to look at the most recent sold listings in all of Lexington to really see if any of these crazy buyers are getting any true bargains.

I began with a search for all the sold listings since 10/1/10 in all of Lexington that had asking prices of $100-250k.  If anybody wants me to look over that amount, just let me know, but I picked that range since that is the bulk of the Lex market.  I also went back that far to give us enough of a sample and to be current enough to reflect the market.

There were 264 sales since that date.  I threw out the brand new houses since builders usually list the base price of a house and the sale price is typically more than that once upgrades are added.  I threw out the few auction properties too since that data doesn’t answer my question.  BTW, some of the auction prices were way lower than the asking price, but you must ask yourself if the asking price was fair, why did it take a room full of people with 10% cash to put down and willing to buy it “As-Is” just to get it sold?

I also took out a handful of the foreclosures.  Believe it or not, most of the foreclosed houses sell for closer to the asking price than a normal transaction.  Most that were in this pool I knew something about….such as a foreclosure in my neighborhood that was trashed and had standing water in the basement.  One of those rare ones where there is a disclaimer about mold that says you should wear a mask or hold your breath while inside.  It sold for $155k and had an asking price of $213,015.  It’s potential is about $280k, so I don’t really think $155k was much of a bargain.

So, that leaves us with 211 normal sales and the foreclosures/short sales that you could get FHA financing on…..In other words, ones that were not missing fixtures, cabinets, etc.  Remember, my goal is to see if the buyers out there are getting deals on a house that belongs to Average Joe, not a builder, bank, or Freddie Mac.

Most of those 211 sales sold for within 5% of the list price.  Many sold for just a few thousand less.  I found 52 that sold for more than 5% less than the asking price.  Almost all of those were in the 5-10% less than list price range.  When I got to those, I looked at the pictures and all to see what I thought the house was worth.  9 times out of 10 it was a case of too high of an asking price to begin with…..Like a house in a neighborhood full of $175k houses that was listed for $189,900.  That buyer didn’t get a bargain.  They paid a fair price for a house listed by an agent that didn’t know what it was worth to begin with.

I guess the part you are waiting for is how many of them sold for more than 10% less than the asking price?  9.  Yep.  9.  I took a look at these and figure it must have been a combination of a little bit of an ambitious asking price and a little bit of a motivated seller with equity.  Of these 9, several were older houses where I can see a little old lady having lived there for the past 40 years and having no mortgage.  Here are the best numbers……and remember these are the ones with the biggest difference in list-to-sale price, it doesn’t necessarily mean that they were worth the asking price: 

ASKING PRICE:             SELLING PRICE:

$175,900                         $119k

$177,500                         $131,600

$149,900                        $135k

$159k                              $140k

$172k                              $156k

$199,900                        $160k

$199,900                       $160k (This one was way over-priced to begin with!)

$199,900                       $180k

$235k                             $200

So there you have it.  Looks like 9 of 264 buyers got what appears to be a good deal on a house if you look at just the list-to-sale price.

Seller’s today know the initial offer on their house is going to be low, so go ahead and feel them out.  You’ll be able to get most of them to go as low as they can. But if you want to eventually buy a house, you’re probably still going to pay a fair price…….Sorry, but I’m just putting the REAL in Real Estate for you 😉

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