The Value of Contrary Information

About all I remember from my one college statistics course is something called “the coefficient of correlation.”

Ranging from “+1” to “-1,” it indicates how predictive/associated one variable is with another.

ceilingWhich leads to some counterintuitive insights.

Such as (as the Statistics professor noted), if you’re picking investment advisors, the ideal is someone whose stock picks are always right (coefficient = +1).

But, someone who’s always wrong (coefficient = -1) is just as useful:  you just do the opposite of what they recommend (the same phenomenon applies to my sister and her taste in movies:  I see what she hates and vice versa).

Real Estate “Comp’s”

Which leads to “Expired” listings in residential real estate.

Agents’ knee-jerk reaction is to ignore them, because they don’t meet the definition of a “Comp” (“Comparable Sold Property”):  similar in style, condition, size, and location as the subject home, and closed within the last six months (ideally less).

But, that doesn’t mean “Expired’s” don’t still hold valuable information about the market and prevailing prices.

They do.

Specifically, they establish a ceiling for prices.

My standard analysis:  a “For Sale” home that’s priced within 10% or so of fair market value will usually attract a decent offer from a qualified Buyer, lead to a negotiation, and ultimately sell.

Ergo, if the home was exposed to the market for at least a few months, was well-prepped and marketed and failed to sell, it’s overpriced by at least 10% (usually more like 15% or 20% — sorry, Sellers).

P.S.:  the answer to whether Expireds are useful for pricing purposes?

An unequivocal “yes.”

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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