Makayla wants to sell her home, so she has been talking to a real estate agent that a friend referred her to. The agent came over one evening, and toured Makayla's home. Then they sat down at Makayla's kitchen table and the agent talked to her about the process of selling her home. She threw out terms that Makayala didn't know the meaning of, like sales price, list price, and list to sale ratio. By the time the agent left, Makayla was so confused that she decided to do some internet research of her own.
Any good real estate agent will take the time to explain these terms to a potential client in a way that the client will understand. The best list price will be provided to the client, along with an explanation of how the real estate agent came to that amount. This will depend on different factors such as how motivated the seller is to sell the property and what the property is actually worth. For example, a home may be worth $200,000 on the current market. However, if the seller is really motivated to sell perhaps it would be beneficial to list the home at $190,000 to attract more interest in the property.
Definitions
List price is the price that an available property is advertised on the market for. For example, if Makayla decided to list her home for sale with a price of $200,000, this would be the list price. That amount would show up in every advertisem*nt for the home, so potential buyers would know what the seller's price for the home starts at. Sellers don't always sell their homes for the list price. Sometimes they will get more, and sometimes they will get less. This depends on the current market conditions.
Sales price is the price that the buyer actually pays for the property. For example, perhaps they wanted to purchase Makayla's house. They put in an offer for $190,000 and Makayla wanted more. There was some negotiating that took place and both parties finally arrives at a sales price of $195,000. This is the sales price of the home. It is the amount that will be entered into the sales contract and the amount that a lender will take into consideration when providing a mortgage for the property.
An appraisal plays a big part in the final sales price of a home. If a lender is involved in the transaction, the lender must ensure that the home is worth the amount that will be loaned. An appraisal will be done, typically pulling in information about current market conditions. For example, an appraiser will look at similar properties in the area that are comparable to the property being sold. Adjustments will be made when comparing properties, taking into consideration the condition of each property. If one property is completely updated with granite countertops and stainless steel appliances, and another is outdated with laminate countertops and old appliances, the updated home will likely fetch a higher price.
What is this home on the water worth?  |
A good real estate agent will also review comparable properties before listing a home. He will also review comparable properties to advise clients on a good price to offer when clients are interested in purchasing a property. A property listed on the market at a high price won't attract many buyers, and a buyer that offers too much on a home may lose out when the property is appraised and the home doesn't meet the appraisal value needed for the bank to fund the mortgage. All of these factors will affect an agent's list-to-sell ratio.
If these homes were on the other side of the lake, would they be worth the same as the home by itself? |
Ratio
A list to sell ratio involves the difference between the list price for a home and what it actually sells for. Makayla's home was originally listed for $200,000 and sold for $195,000. What was the list to sell ratio for that property? Many agents will present this in a percentage format. One agent may claim to have a 98% list-to-sell average. That would mean that the agent would average 98% of the list price on homes sold. In other words, if Makayla's home was listed at $200,000, the agent could get about 98% of that (or $196,000). Ultimately, Makayla got $195,000 for her property, or 97.5% of the list price.
If an agent wants to attract more clients wishing to sell their homes, a higher list-to-sell ratio will be helpful. Consider two different agents: one has a list to sell average of 98% and the other has a list to sell average of 95%. If a client wishes to list a home for $200,000, he may get $196,000 out of the agent with the 98% list-to-sell average, or $190,000 out of the agent with the 95% list-to-sell average. This is a $6,000 difference, which may sway a client in one particular direction.
List-to-sell ratios can be figured easily. If trying to figure the ratio for a property that is sold already, divide the sales price by the listing price ($196,000 divided by $200,000 = 98%). To figure what the sales price might be when considering an agent with a particular list-to-sell ratio, the formula works in another way ($200,000 times 98% = $196,000).
To unlock this lesson you must be a Study.com Member.
Create your account
FAQs
If trying to figure the ratio for a property that is sold already, divide the sales price by the listing price ($196,000 divided by $200,000 = 98%). To figure what the sales price might be when considering an agent with a particular list-to-sell ratio, the formula works in another way ($200,000 times 98% = $196,000).
What is the sales price list price ratio? ›
You can determine the ratio by dividing the final sale price by the last list price and multiplying that number by 100 to express the ratio as a percentage.
What is the difference between list price and selling price in real estate? ›
If a home's list price is not generating enough offers, the owner may choose to re-list the property at a lower price. While the list price is set at the discretion of the owner, the selling price is fully negotiable and will be decided on between the buyer and seller.
What is the sales ratio in real estate? ›
Sales Ratio (SR) – the ratio of assessed value to market value found from a property that has sold; ratio equals prior year (equalized) assessed value (AV or EAV) divided by the current year sales price (SP). Sales Ratio Study – a analysis of the percentage relationship of assessed value to market value.
How do you calculate list price in real estate? ›
When setting your list price, consider factors like your home's location, size, condition, and features, as well as current market trends, the prices of comparable homes in your area, and your desired timeframe for selling. Consult with a top agent to help you determine the best list price for your home.
What is a good sales to listing ratio? ›
This ratio reveals how close (or far) the selling price was to the asking price, serving as a barometer for market dynamics. A ratio above 100% typically indicates a seller's market, where homes often sell for more than their listed prices.
What is a good sales to price ratio? ›
While the ideal ratio depends on the company and industry, the P/S ratio is typically good when the value falls between one and two. A price-to-sales ratio with a value less than one is better.
How to calculate list price? ›
Calculate List Price from Discount and Sale Price. The list price is the sale price divided by the difference of 1 minus the result of discount divided by 100.
What is an example of a list price? ›
In short, list price is the starting point for negotiation in business. It's the full price that a product or service is advertised for, without any discounts or promotions applied. For example, if a company is selling a product for $100 with a 20% discount, the list price would be $125.
What determines listing price? ›
Real estate agents often use Comparative Market Analysis (CMA) to determine a realistic listing price. CMAs compare the home for sale with similar properties that have recently sold, are currently on the market, or failed to sell, adjusting for differences like location, size, and condition.
In summary, the Debt Service Coverage Ratio (DSCR), Loan-to-Value (LTV) Ratio, Capitalization (Cap) Rate, Cash-on-Cash Return (CoC), Gross Rent Multiplier (GRM), and Net Operating Income (NOI) are all important financial ratios for analyzing the financial performance of a commercial real estate investment.
How do you calculate real estate housing ratio? ›
What Is The Housing Ratio? The housing expense ratio, also called the front-end ratio, is a percentage determined by dividing the borrower's housing expenses by their gross income.
What is real estate ratio? ›
Simply divide the median house price by the median annual rent to generate a ratio. As a general rule of thumb, consumers should consider buying when the ratio is under 15 and rent when it is above 20.
How to calculate list to sale price ratio? ›
The sale-to-list price ratio is the ratio of a home's final recorded sale price to its initial asking price. It's calculated by dividing the final sale price by the initial asking price, and expressed as a percentage.
What is a list price in real estate? ›
The list price, in the real estate world, is the suggested gross sale price of real estate property when it is put on the market. In other words, it's the seller's asking price.
What is the best way to determine a list price for a residential property? ›
Determining the Asking Price: The Basics & Trends
- Location.
- Prices of recently sold homes.
- House condition.
- Home improvements and updates.
- Market conditions in your area.
The price-to-sales ratio (Price/Sales or P/S) is calculated by taking a company's market capitalization (the number of outstanding shares multiplied by the share price) and divide it by the company's total sales or revenue over the past 12 months. 1 The lower the P/S ratio, the more attractive the investment.
What is the SP price-to-sales ratio? ›
The price to sales ratio (P/S) can be calculated by dividing the latest closing share price by its sales per share as of the latest reporting period — which is ordinarily the latest fiscal year, or an annualized figure (i.e. trailing twelve months with a stub-period adjustment).
What is the formula for pricing ratio? ›
The ratio pricing method is used to calculate a base selling price for a menu item that ensures all food and non food expenses are covered while still meeting the desired profit goals. A ratio is calculated using the sum of non food costs and profit and then dividing that amount by the cost of food.
What is the ratio of Cost to selling price? ›
By dividing the costs of selling to the total value of sales – and then multiplying the result by 100, you will get the ratio you were looking for. So, the formula should look like this: (Cost of selling / Total value of sales) x 100. Keeping it simple and basic is the right way to go.
