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Understanding List-toSale Ratio

Feb
25
2020

Every seller's dream is to sell their home quickly and for as close as possible to, if not more than, the asking price. On the flip side, a home buyer wants to negotiate down as far below the asking price as they can.

In other words, a seller wants a list-to-sale ratio at, or above, 100%, while a buyer is looking for as low a ratio as possible. Exactly where the two parties meet on that spectrum depends on many variables, the biggest being overall market conditions. 

The list-to-sale ratio is a sales metric used by real estate professionals to help determine whether homes are selling for more or less than the asking price in their local market. The ratio is often used to determine a strategy for listing price and is helpful in negotiations. To calculate the ratio, divide the actual sale price by the property's final list price and express the result as a percentage. For example, a home that is listed for $200,000 but sells for $195,000 has a list-to-sale ratio of 97.5 percent.

We sometimes see the exciting three words (for sellers) "Sold Over Asking" which occurs when a home sold for more than its list price. This might happen where the seller receives multiple offers on the home or if the home was strategically underpriced.  Conversely, a ratio less than 100% shows that a home sold for less than its list price. Real estate professionals typically calculate the average list-to-sale ratio for a group of homes, or an entire region, so they can see at a glance which way the market is moving. This will help account for any properties that were strategically under-priced in order to draw multiple offers and bidding wars, or properties that were listed too high and suffered price reductions to generate a sale.

Aside from a few peaks and valleys (the highs of early Spring 2017 and lows of winter 2019), the average list-to-sale ratio in the Kawartha Lakes has been relatively consistent at near 97% for non-waterfront and roughly 96% for waterfront properties (not counting for seasonal fluctuations). We generally counsel our clients that a list-to-sale ratio anywhere near 95% is reasonable.

Looking at list-to-sale ratios can help homebuyers and sellers negotiate on pricing. For example, an average list-to-sale ratio of less than 100 percent shows that sellers generally accept less than their asking prices in that particular market. Home seekers may be able to secure the property by making an offer that reflects the average discount that buyers are receiving in that area. Sellers reviewing the list-to-sale ratio can see at a glance whether their list price is too low or too high, and adjust the list price accordingly.