I had a buyer client tell me this week about a conversation she had with another agent at a weekend open house. The agent, armed with impressive binders and folders of statistics and spreadsheets, shared a little secret. It seems according to this agent that homes in Carmel Valley are selling at 96% of their list price.
My client shared this news with me with the same enthusiasm of someone who has just unlocked the mysteries of the missing socks — You know, the ones that begin the laundering journey as pairs, sole mates if you will, but arrive from the dryer as fierce independents, with nary a match in sight. Ninety-six percent! Now we know what to offer!
This is just another example of a useless statistic. According to our crack MLS system, the new one I am so fond of, the sale price to list price ratio (SP/LP) for homes sold in Scripps Ranch last month was 95%. In May of last year it was 97%, as it was the year before. In April of this year the SP/LP was 96% versus 97% in April of last year and the year before.
Homes always tend to sell within 2 to 4 percent of list price — final list price. The difference is that today it may take a few price reductions before a home finds that sweet spot, the price at which buyers will perceive value.
I can already hear the nay sayers. What about a community with an abundance of short sales and foreclosures? We know the sellers and lenders are dumping those, right? In the Chula Vista zip codes, areas notorious for a high number of distress sale offerings, the average SP/LP was 97% in May of 2006 and 2007, and was 98% in 2008.
Now, in Chula Vista the absorption rate is a much higher 5.7 months (based on May detached sales) compared to our approximate 4.3 month absorption rate in Scripps Ranch. This tells me that even though our market is slower, more uncertain, different than the market of two years ago, contracts will be consummated on average within reasonable striking distance of the final list price. Maybe the sellers rejected a boatload of offers representing a much deeper discount, and only when they came to terms with the market realities did they adjust price and make the sale. Maybe the buyers had the “Why bother?” mentality, figuring they would just wait for the reduction that would bring the price back into the land of logic. Whatever the reasons, it is what it is.
There is much more to the story, of course, but this is a good segue into the idea of the “low ball” offer, one I will try to get to in due course. In the meantime, this useless statistic has some value, even if that value is nothing more than reinforcing the importance of pricing at or near market value. The whole testing the waters philosophy is never a good one, not in any market and particularly not in this one. And I say this with 99.893 percent certainty. If you are sincere in your wish to sell your home, price it well, and get it sold.