The Sale/List Price Ratio

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As of the writing of this Blog post, the average sale/list price ratio for Barnstable County is 94%, meaning that ON AVERAGE, homes are selling for 94% of their list price. This leads both buyers and sellers to believe that a home priced at $500K should sell for $470K. But when it comes to negotiating, whether you are the buyer or the seller, the sale/list price ratio is not a meaningful statistic, and should have little to no influence when considering the likely sale price of a home. Here’s why.

First of all, when we talk about a ratio involving “list price”, we need to know what list price is being used. Is it the ORIGINAL list price, or the MOST RECENT list price (after potentially many reductions). The figure listed above is actually referring to the original list price, meaning that the ratio involving the most recent list price would very likely be a larger percentage (perhaps 96%).

But regardless of whether it is the original or most recent list price, it is still meaningless from a negotiating standpoint, because the number is nothing more than an average of diverse opinions. Some sales could show ratios at 75%, while others could show ratios over 100% (meaning the home sold for MORE than the asking price). The list price is set by the Seller and may or may not have any bearing on market reality. The list price could be ridiculously high, or just a little high, or right on the money, or even BELOW market value. It is entirely up to the Seller to decide the list price of a home. Hopefully the Seller has a good listing agent who has done a thorough analysis of market value, but that doesn’t guarantee the Seller took the Realtor’s advice and it doesn’t guarantee that the advice was sound.

A similar argument could be made regarding the ratio comparing assessed value to sale price, although with certain constraints, that ratio is arguably a little more useful. If you are comparing homes in the same neighborhood that were built around the same time and have received a similar amount of “like” updating, the assessed/sale price ratio could be ONE factor to consider, but by no means the only nor most significant.

The only way to discover the fair market value of a home is through a market analysis of “like” properties either nearby or in similar areas that have recently sold. Homes that are currently on the market are not as useful because those homes have not actually SOLD at those prices. By comparing YOUR home, or the home you are trying to purchase, against these comparative homes (or “comps”), you will obtain the best knowledge regarding the likely selling price of your home or the home you are pursuing.

Whether buying or selling, our team of local, knowledgeable Realtors would be happy to represent you and provide you with a thorough and thoughtful analysis of the value of your home or the home you are hoping to purchase. Please contact us for expert, professional, local advice.

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