When you sell your home, you naturally want to get the highest possible price for it. When you buy a house, you want to buy a house at the lowest possible price. Of course, the price point at which both parties ultimately meet depends on market conditions and other factors.
Buyers, sellers, and real estate professionals can measure the difference between a home’s list price and what it’s actually being sold for using what’s known as the sale-to-list ratio. Understanding how this relationship works can help you identify negotiation trends such as: B. whether it is a buyer’s market or a seller’s market for the properties in your area.
Define the sales to list ratio
As the name suggests, the sale-to-list ratio (also known as sales-to-listing or list-to-sale ratio) measures the difference between the final purchase price and the original asking price of a property. You can determine the ratio by dividing the final selling price by the last listing price and multiplying that number by 100 to express the ratio as a percentage.
For example, let’s say a seller lists a home for $415,000 but ultimately sells the home for $403,800, the median price for a new home in the United States in July 2022, according to the National Association of Realtors. You can calculate the sale-to-list ratio for this property as follows:
- $403,800/$415,000 = 0.973
- 0.973 x 100 = 97.3 percent
In this example, the sell-to-list ratio is 97.3 percent, meaning the home sold for 97.3 percent of its list price. This figure – the fact that it represents a sum below the asking price – suggests that the buyer may have had a little more leverage in this negotiation.
Conversely, if a home sells for more than its list price, the sell-to-list ratio is over 100 percent. In this case, a number above 100 percent can show that the seller had more leverage and may have received multiple listings for their property.
Sale-to-list ratio: why you should care
Whether you are a buyer or a seller, looking at the ratio of the selling price to the asking price can help you gain insight into negotiating a transaction. You can find additional value by calculating the list sale for a group of houses, which you can do by adding up each house’s ratio and averaging the grand total.
Arming yourself with this information allows you to measure an agent’s performance. By calculating the sell-to-list ratio of a broker’s recent transactions, you can get a sense of whether the broker is getting the best deal for their clients or is giving their counterparts on the other side too much bargaining power. Of course, you need to compare the broker’s sell-to-list ratio to other local brokers, as the numbers could be skewed if you’re in a buyer’s or seller’s market.
Let’s say the sell-to-list ratio in an area is 107 percent, with homes selling for 7 percent above their list price. As a home seller, you could potentially sell your home for 7 percent more than comparable sales in the area and back that asking price with data – the sale to listing ratio. If successful, you could get more money for your home, resulting in higher net proceeds.
Keep in mind that the sale-to-list ratio may not matter as much — or may be skewed — in a hot market where property bidding wars are common. In such conditions, the buyer’s main motivation is simply to rush into the home and not be outbid. However, in a more dovish market, smart negotiators could use the metric to support their bids.
“If there’s a savvy buyer working with an astute real estate agent, a homebuyer could target certain home sellers with an aggressive offer that’s backed by data and not solely based on the highest and best offer,” notes Joshua Massieh, a real estate agent with Based in San Diego, California. “As the market changes, this data point will help sellers and buyers alike translate the data and help both parties achieve their goals.”
Find a local trusted agent
Buying or selling a home can be complex, but an experienced real estate agent can help. In addition, a qualified agent can represent your interests and negotiate on your behalf. Here are some ways to find the best real estate agent for your needs.
- Ask friends and family for a personal recommendation: According to a 2021 National Association of Realtors (NAR) study, 47 percent of homebuyers found their realtors through recommendations from family members or friends. Similarly, 68 percent of home sellers found their agent through a recommendation or used an agent they had worked with on a previous transaction. While a recommendation from a trusted friend or family member carries weight, you still need to carefully consider each agent’s experience and qualifications to ensure you are making the right decision.
- Search brokers: Real estate agents – with a capital R – are NAR members who have formally committed to abide by the association’s code of ethics and have met their educational requirements. You can identify a member by the REALTOR® listed after their name on their website or business card. While it’s not a guarantee of a great professional, broker credentials often indicate a certain level of experience and dedication on the part of the broker.
- Check online reviews: Another option is to research online reviews for local real estate companies and agents in your area. You can usually find helpful reviews on Google or online marketplaces like Zillow and Redfin. Look for agents whose past clients say they are knowledgeable and available when needed.
According to Massieh, the most important trait to look for in a real estate agent is their level of experience.
“Transactions are stuffed with legal jargon that nobody but lawyers understands,” says Massieh. “Find a real estate professional who knows the contract like the back of his hand and someone who isn’t afraid to be aggressive towards the other party.”
Meet with an agent before hiring them to represent you. Don’t just ask about their track record of successful transactions — specifically ask about the ratio of sale to list of those transactions. It can give you a sense of how good they are at helping customers score, be they sellers or buyers.