Interpreting Statistics: Sold Price vs. Asking Price
Statistics help us know what happened so we might prepare for what could happen based on the patterns we’ve observed. It is very easy to manipulate statistics to show results that will help us gain your trust and confidence. One of the statistics that I’ve been looking at in the Valley is the percentage of sold price versus asking price.
When a home receives an offer, those of us who think statistically and mathematically will quickly determine what the percentage of the asking price the offer represents. On a home that is listed for $300,000, if someone offers $285,000 they have submitted a 95% offer. This information can be very useful for the buyer to determine what to offer the seller. If the buyer were to look at this from the percentage angle as opposed to the dollar amount, and they were willing to put in a 90% offer, we’d know that their offer is going to be $270,000. What the seller does at this point is up to the seller, but that’s not the point of this article.
With thousands of sales every month, it is becoming easier for us to compare your property to the rest of the market. One of the comparisons we look at is the sold price to asking price, which helps our sellers understand what to expect when they receive an offer. What has often been overlooked is the percentage result we obtain by determining the sold price versus the original asking price. Most reports that we run are defaulted to show the list price at the time of sale, not the list price at the time the property was listed.
I conducted a simple comparison on 16 properties of a subdivision in the west valley that were all comparable properties. In order to obtain enough results, I had to go back two years. I compared the sold to list price of each property and then averaged the results. What it showed was that on average, the properties that were selling in that neighborhood were selling for approximately 95.6% of their list price.
After calculating the percentage based on the original list price, which is the price for which the seller originally wanted to list their home, the results showed that the sold price was actually 88.8% of the original list price.
Without conducting your own statistical analysis, it is difficult to understand what someone might be attempting to show you if they don’t disclose how they came up with their numbers. On one hand, you could pitch to your buyer that it’s likely the seller will settle upon a price that is around 95% of the asking price. Likewise, you could show a potential seller that their asking price is far too high and that they could expect on average to settle for 88% of their original asking price.
Make sure you know when you are presented with statistics what those statistics are actually measuring, and which statistics really matter to you.