Real Estate Agents Who Claim To Sell Homes At Higher Prices: The Bogus Sale To List Ratio

Real Estate Agents Who Claim To Sell Homes At Higher Prices: The Bogus Sale To List Ratio

About a year ago I posted on some of the real estate agent false advertising in Chicago, including preposterous claims made that a particular realtor could sell homes for 10% more than other real estate agents. After that post I found two other examples of agents making similar claims. These are clearly ethical violations and as I explained in my earlier post such a claim of higher sales prices can never be proven – except that…

…I just found a 4th Chicago agent making a similar claim on their own Web site but this time they lay out their math for us as shown below and it’s quite enlightening. As you can see, I’ve blacked out as much personally identifying information as possible but the calculation does not support the claim in the way it’s worded at all.

Bogus real estate agent statistics

You’ll notice that the claim at the top is that this particular agent gets 9.5% higher prices (implied). At the bottom it’s listed at 8.7%, which I assume is some kind of typo. However, this percentage is not based upon differences in sales prices – because that’s impossible to calculate – but rather differences in the sell to list ratio (sale price / list price), incorrectly referred to here as the list to sell ratio.

This real estate agent is not alone in bragging about their sell to list ratio. It’s a common ploy used by real estate agents to get listings. But that’s a bogus ratio since there are two ways to raise it: either sell at higher prices or list at lower prices and guess which one of those is probably at work here. In fact, if we invert the ratios and look at the list to sell ratio we would see that this agent’s ratio is 102.4% vs. the average agent’s 113.4%. In other words, we could just as easily say that this agent lists 11% lower than other agents. Where’s the skill in that?

Let me lay it out in stark terms for you. Would you rather list your home for $425,000 and sell it for $405,000 (a 95.3% ratio) or would you rather list it at $400,000 and sell it for $399,000 (a 99.8% ratio)? In this example a lower sales price would correspond to a higher ratio.

I’m glad that this agent at least has the decency to lay out the math for us and keeps the discussion centered on percentages instead of trying to convert it somehow to dollars, which would be further misleading. Nonetheless the sell to list ratio is a bogus metric. If you don’t agree with that conclusion let me know in the comments section below.

#HomeSelling #Realtors #RealEstateAgents

Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider’s view of the seamy underbelly of the real estate industry, or you just think he’s the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.

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