How important is Listing Price when first listing a residential property? Recently I researched and analyzed sold and expired listings in the four Stonebriar subdivisions of Fayetteville, Georgia. My research proves empirically what we should intuitively know. “Priced-to-sell” listings sell after fewer Days-On-Market or “DOM” and for amounts nearer their Listing Price. Conversely, “over-market” priced listings languish on the market and then fail to sell or sell only after considerable price reductions and/or seller’s contributions are applied.

My research quantifies the correlation between the first Listing Price and DOM. In my full report, this relationship is graphed as a linear trend line. The trend line shows that the greater the initial Listing Price error, the longer the expected DOM. Over-pricing by as little as four percent will cause a listing to remain on the market for an average of 75 days. Over-pricing by Six percent goes DOM of 150 days. Eight percent goes DOM of 225 days and ten percent goes DOM of 300 days. These percentages do not necessarily create big dollar numbers for the average priced residence. For example, six percent of $250,000 is only $15,000.

The Georgia Multiple Listing Service (GAMLS) was my data source and may not reflect all sales from other sources and other means. The observed period was November 2004 through November 2006. The total number of unique listing addresses reported by GAMLS was 72. That includes six listings that failed to sell and 62 listing addresses reported sold. During the two-year period, 21.5% of all existing Stonebriar residences were listed for sale and 18.5% were sold.

The average Listing Price of the sold listings was $249,100. The average Net Sales Price was $235,600 or 5.4% less than the average Listing Price. The average DOM for the sold listings was 112 days. The lowest DOM for sold listings was 4 days while the highest DOM for sold listings was 346 days. In contrast, the average DOM for the six failed listings was 222 days. The lowest DOM for failed listings was 70 days while the highest DOM for failed listings was 462 days.

Of the sold listings, 31 listings sold without Listing Price revisions. These priced-to-sell listings sold at a low average 2.7% reduction in Net Sales Price from the Listing Price and with an average DOM of 50 days. Two listings stand out as exceptions in my analysis. Both listings sold at reductions of about 7.4% after approximately only 30 DOM. These two listings were over-market priced by sellers who were quick to back off of their price positions. For 13 of these 31 listings, sellers contributed on average $2,500 to buyer’s closing cost.
For 30 of the sold listings, Listing Prices were reduced during their respective listing periods. In some cases, Listing Prices were reduced multiple times and/or over multiple listings.
The average reduction in Listing Price for revised sold listings was $12,600.

These over-market priced listings sold at a high average 8.2% reduction in Net Sales Price from the Listing Price and with an average Days-On-Market of 174 days. For 17 of these listings, sellers contributed on average $4,700 to buyer’s closing cost.

Over-market priced listings, when ranked by Net Sales Price percentage change, further demonstrate the Listing Price correlation with DOM. The lower half of these listings sold for on average 5.0% less than the Listing Price and caused a higher average DOM of 133 days.
The upper half of these listings sold for on average 11.5% less than the Listing Price and caused the highest average DOM of 216 days.
In my opinion, the data base is large enough to be able to say with some confidence that the object lesson applies to most established communities. Consequently, the correlation between over-market pricing and Days-On-Market should be fairly consistent to all markets. My analysis only looked at existing data.
I made no attempt to quantify the market values of the listings by performing any sort of valuing analysis, or qualifying any of the findings.

I also made no attempt to determine the dollar value, time and situational consequences of over-market pricing. However, those factors need to be considered and discussed by the seller and his or her real estate agent.

If you have any questions or comments about this article or would like a copy of my complete report, please email or call me. Chuck Fister, REALTOR®, Direct: (678) 587-3425 or e-mail to chuck.fister@metrobrokers.com

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