An appraiser tracks a group of 50 pending sales, counting each listing once. Of those 50, 45 closed during the period. What is the pending-to-closed conversion rate?
Correct Answer
C) 0.90
Cohort closure fraction=45 closed from tracked cohort/50 initial tracked pendings=0.90. This is the numerical result for this tracked cohort, not an automatic market-condition or property-value conclusion. Common errors: inverting the ratio (pending ÷ closed) gives 1.11; reporting the fall-through share instead of the conversion rate gives 0.10; dividing by pending plus closed gives 0.47.
Why This Is the Correct Answer
Option C is correct because 45 closed sales from the tracked cohort divided by the 50 tracked pendings equals 45 ÷ 50 = 0.90. This is the numerical result for this tracked cohort, not an automatic conclusion about market conditions or value.
Why the Other Options Are Wrong
Option A: 0.10
Option A, 0.10, is the fall-through share: (50 − 45) ÷ 50. It measures pendings that did not close, not the conversion rate, which is 45 ÷ 50 = 0.90.
Option B: 0.47
Option B, 0.47, divides by pending plus closed: 45 ÷ (50 + 45). The closed cases are part of the same 50-listing cohort, so the denominator is 50, giving 45 ÷ 50 = 0.90.
Option D: 1.11
Option D, 1.11, inverts the ratio by dividing pending by closed (50 ÷ 45). The rate places closed sales in the numerator: 45 ÷ 50 = 0.90.
Closed over the cohort
Conversion rate puts the closed members of the cohort over the cohort's starting count.
How to use: Use it to check that the numerator is a subset of the denominator before dividing.
Exam Tip
A conversion rate for a cohort cannot exceed 1.0, so a result like 1.11 signals an inverted ratio.
Common Mistakes to Avoid
- -Inverting closed and pending in the ratio
- -Reporting the fall-through share instead of the conversion rate
- -Adding closed sales to the cohort count in the denominator
Concept Deep Dive
Analysis
This question tests a cohort-based ratio used in market analysis. The pending-to-closed conversion rate divides closed sales from the tracked cohort by the number of pendings in that cohort. Keep closed cases in the numerator and the cohort count in the denominator.
Background Knowledge
Appraisers analyze pending sales, along with expired and withdrawn listings, to understand current market activity. Tracking how many pending contracts close helps reveal whether deals are holding together. Such ratios are inputs to market analysis and need interpretation alongside other data.
Real-World Application
While completing market research for a residential assignment, an appraiser tracks a group of pending sales in the neighborhood to see how many close. A high share closing supports the appraiser's view that contracts are holding, while a falling share would prompt further investigation.
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