Define sale-to-original-list price ratio as final sale price divided by original asking price. What does this ratio describe?
Correct Answer
D) How closely final prices track asking prices
For the explicitly defined sale-to-original-list ratio, final price is divided by original asking price. It measures how closely sale prices track those asking prices. It is not a brokerage market share, commission rate or listing sell-through rate. Interpretation also depends on pricing strategy, price changes, concessions and the market; proximity to one alone does not establish strong demand.
Why This Is the Correct Answer
Option D is correct because dividing final sale price by original asking price shows how closely final prices track asking prices. A ratio near 1.00 means sales closed close to the original asking price, while a lower ratio means prices fell further below it. Interpretation still depends on pricing strategy, price changes, concessions and market conditions.
Why the Other Options Are Wrong
Option A: The proportion of listings that eventually sell
Option A, the proportion of listings that eventually sell, describes a sell-through or absorption measure. That counts listings, while this ratio compares prices.
Option B: The commission rate paid on each transaction
Option B, the commission rate paid on each transaction, is a brokerage fee measure. The sale-to-original-list ratio compares sale price with asking price and says nothing about commissions.
Option C: The share of listings taken by one brokerage
Option C, the share of listings taken by one brokerage, describes brokerage market share. It has nothing to do with the relationship between sale prices and asking prices.
Sold over asked
Read the ratio as sold over asked: how much of the original asking price the buyer actually paid.
How to use: Use this phrase to recall that the ratio compares two prices for the same property.
Exam Tip
Match the answer to the ratio's numerator and denominator. Both are prices, so answers about counts, shares or fees do not fit.
Common Mistakes to Avoid
- -Confusing the ratio with a listing sell-through rate
- -Treating a ratio near 1.00 as proof of strong demand by itself
- -Ignoring price reductions and concessions when interpreting it
Concept Deep Dive
Analysis
This question tests interpretation of the sale-to-original-list price ratio. Dividing the final sale price by the original asking price shows how closely selling prices tracked what sellers first asked. It is a pricing measure, not a measure of brokerage activity or listing success rates.
Background Knowledge
Sale-to-list price ratios are common market indicators in appraisal reports and market analyses. Using the original list price rather than the final list price captures the effect of any price reductions. The ratio alone does not prove strong or weak demand without considering concessions and pricing behavior.
Real-World Application
An appraiser notes that homes in a neighborhood sold at an average of 0.96 of original list price over the last six months. She considers whether price reductions and seller concessions explain the gap before commenting on market conditions.
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Sale prices are $390,000, $400,000, $410,000, $420,000, $430,000. Find the median of their absolute deviations from the sample median. Report to the nearest dollar.
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Assessment-to-sale ratios are 0.94, 1.09, 0.98, 1.03, 1.06. Compute the median; order the observations first and average the two middle values if n is even. Report as a decimal ratio to three places.