The Utility of “Negative” Information
If the 4 Bedroom, 3 Bath 1945 Colonial three blocks away from you just sold for $650,000, that’s probably a good starting point for pricing your 4 Bedroom, 3 Bath 1945 Colonial.
But what if the neighbor’s Colonial was on the market for six months at $650,000, and didn’t sell — perhaps even after dropping in price to $624,900, and then $599,900, before being cancelled or expiring?
Can you still price off of it?
Yes, to the extent that it sets an upper bound for your home.
Upper Bound
When a well-prepped, well-marketed home doesn’t sell, you can usually infer that its actual value is at least 10% less — sometimes a lot less.
That’s because, on average, homes today sell for a little over 90% of their list price.
In the example above, if a Buyer showed up offering close to $600k, most rational Sellers would figure out a way to do a deal.
So, if the would-be Comp didn’t sell, and you want to sell a similar house — you probably would consider listing at $574,900 or even $549,900.
Taking Account of “Active’s”
Which leaves the other half of the original question: why can’t you price off of “Active” listings?
You certainly can’t ignore them, because they’re your competition.
However, there’s no way to establish fair market value until a Buyer shows up to pay it!
P.S. Statistics has something a bit similar to using “Expireds” called the coefficient of correlation. When it’s positive 1.0, two things move exactly in tandem; negative 1.0, and they’re opposite.
A bit counter-intuitively, -1.0 is just as useful as positive 1.0.
Case in point: when I want to pick a movie, I just ask my sister what she recently saw that she hated.
