Percent of Original Price Received is one of the most confusing statistics in the housing market. It has a simple definition, but many do not know what it implies and either make up something or discount it as having no use or meaning. Another problem is that this percentage goes up and down randomly compared to other housing market statistics. Therefore, I decided to write this article to help buyers and sellers and their agents understand what it implies and what causes it to seem random.
“Original Price” is the amount at which house is listed. The price that it finally sells for is the “Net Sales Price”. The Percent of Original Price Received is simply the net sales price divided by the original price and made into a percentage.
There is much speculation on how to judge a market or agent’s performance based upon this number. I once read about a realtor who stated that if you compared the average Percent of Original Price Received of various realtors you could judge their bargaining ability. He also happened to point out that he had a much higher than average Percent of Original Price Received which is why you should use him. This may not be true and I will show you why soon AR10 82.
The cause of the seeming randomness of Percent of Original Price Received is because many people are gaming the housing market. Many people put their house at a higher value than market so that they will be able to bargain lower to the value that they really want to sell. Other people purposely put their house at a lower than market value in an attempt to get multiple offers so that they can negotiate up to the higher value they desire. Some people originally put their house on the market much higher than market value because they believe that their house is worth more than other very similar nearby homes. So, if you are a realtor who is consistently getting a high average Percent of Original Price Received it is because you are only putting houses up at market value and may in fact be doing worse for your clients than a realtor who lists homes higher then bargain lower.
Because of all this gaming of the market, some people think that it is a useless statistic. However, it tells you a few interesting things. For a buyer, it gives you an idea of know how much the average seller will go down on price, helping you get a better deal. To get a better handle on the real number, you should remove all homes that sold for more than list price, because those were priced too low. For a seller, you can see how much you should price your house above what you really want, because pricing your house lower and hoping to get multiple bids does not usually get you all the way up to market value. Therefore, this index can help you save money whether you are buying or selling.