The myth of selling BTC to fools locally is laughable. Nobody is stupid to pay more for BTC than market rate I would believe.
I've done just that, might only have been a few thousand dollars worth, but a 10-20% premium was still worth having.
Did you find a fool, or someone using the coins for illicit means?
For many people actually buying BTC is a huge pain in the ass. If you were only buying a couple hundred dollars worth of BTC it might be worth your time to just pay someone $40 extra to get you the BTC, especially if it also saves you a few bucks in exchange fees.
Actually, I don't think they were a fool, and I tried to get them to use an exchange, pay real prices and basically stop bugging me. It was just easier for them to send me funds and for me to send them coins.