Thursday, March 19, 2009

98% of list ! NO, NO, NO, NO !!!!

[See update at end]
This is a pet peeve of mine. In two days, two flyers in my own mailbox from fellow agents emphasizing a property sold for, respectively, 95% and 98% of list price. Before anybody gets excited, the senders have done nothing wrong and what they say is true.

But I would STRONGLY suggest that you not give ANY weight to the fact that the property sold for a high percentage of list. Why? Let's check out these two mailings.

The first one is really pretty straightforward and accurate, claiming a 95% sale-to-listing ratio and a quick 10 day sale. This is very good in today's market, where the days-on-market and sale-to-list ratios are starting to look like the numbers we saw in "the old days". My only point is that this property was a fairly unique, higher end home, and the 5% below list represents almost $80,000!

The second one more clearly shows why we don't use these statistics and why we don't think people should use them to evaluate a representative. The home in question is promoted as having sold for 98% of list. It did. 98% of the LAST list. The full story is that the home was listed for 68 days at its original price. It was then re-listed at a slightly lower price. Sometime later the price was reduced another $20,000 and ultimately sold for almost $12,000 below that number.

This was quite likely a fair price. The time and pricing changes were likely quite understandable given that the whole thing was happening while the market was trying to decide what to do in response to economy spasms.

But, the way we look at it, the property sold in 3 1/2 months for 93.7% of the original list. That very likely indicates good work under the circumstances. But I doubt you will ever see it on a postcard.

This post qualifies as part of a series. My intro to how NOT to select a rep. was posted previously. You can find it here.

[Update: A client recently pointed out how this statistic could be useful.  The client agreed with me that using the sale:list ratio of the majority of agents would in no way distinguish or rank them.  However, she suggested that an unusually low ... OR HIGH ... ratio would be a good reason to eliminate an agent.

You aren't likely to hear anybody bragging about a low ratio.  But the point was that it would indicate an agent who encouraged or accepted prices that were too high AND did little to market them.  The result: limited reruns, reductions, etc and a home taking a long time to sell. 

OK, that was pretty much just academic.  Not many agents are like that.  If they were, they would have figured out how to disguise the statistic and/or you would never hear about it.  But too hight??  Yup, my client suggested that a high ratio implies properties being under-listed to encourage a quick sale not necessarily at the best price.  I'm not sure that would happen in the recent/current sellers' market where under-pricing is a viable -- and often annoying -- strategy.  But in a more balanced market, as many are now predicting ... good point. April 17, 2011]

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