# Why You Can Price off of “Expired’s” (kind of), But Not “Active’s”

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.