Uncategorized June 6, 2023

Synthesizing the Statistics: Closed Price-to-List Price Ratios

100.21%. That was the average Closed Price-to-List Price Ratio (CP/LP) across the Denver metro area in April 2023 (source – Denver Metro Association of Realtors Market Trends Report May 2023). That number is up from 99.79% during the previous month and down from 106.87% a year ago. This statistic offers valuable market insight to both sellers and buyers alike. 


What is the closed price-to-list price ratio? 

In a nutshell, the CP/LP Ratio explains what percentage of the asking price a seller received when they sold. Extrapolating from the numbers shared above, Denver sellers are commanding, on average, 100.21% of their listing price (essentially, right at the asking price). This time last year, sellers across the metro area received 106.87% of their listing price when they sold (on average, 6.87% over asking). 


Why is the information helpful?

Short answer – offer strategy for buyers and pricing strategy for sellers. In general, the Denver market is very neighborhood-specific; some neighborhoods hold their value very well while others are more susceptible to subtle changes in the market. While the current average CP/LP Ratio is 100.21% across the metro area, in some neighborhoods that percentage may be 108% while in other neighborhoods that number may be 94%. 


The CP/LP Ratio helps buyers determine their offer strategy. Buyers need to know and understand how likely they are to encounter competition, how fierce that competition might be, and how far over the asking price they may have to offer to win in that competition. If the CP/LP Ratio in their desired neighborhood is over 100%, they know an offer less than the list price is not likely going to cut it. Conversely, if an average CP/LP Ratio in their target neighborhood is less than 100%, then buyers know they may have the leverage to offer less than asking and still stand a chance at having their offer accepted. 


For sellers, it’s a similar scenario with respect to pricing strategy. The CP/LP Ratio illustrates what similar homes in their neighborhood have sold for so they can set realistic expectations for what the market may bring them for their home as well. Setting a list price too high may mean they will need to implement a price reduction at some point before selling, thereby lowering their actual CP/LP Ratio, while setting a list price at market value or slightly lower gives them a greater opportunity to generate multiple offers and sell for higher than asking, ultimately resulting in a higher CP/LP Ratio. 


In short, the closed price-to-list price ratio is a very valuable metric for both buyers and sellers in understanding the nuances in pricing, whether in a specific neighborhood or in the overall market.