We have been asked: “Why do you put the median sales price on your just listed postcards and just sold postcards?” We hear that the majority of people like to use the term average. Average Sales Price doesn’t always accurately depict our real estate market areas.
Median Sales Price vs. Average Sales Price
When you’re buying or selling a home, you might evaluate the average sale price or the median sale price in your town. But what’s the difference between the two figures, and which number should you rely on as a valid measure of typical home prices in your area?
The Difference Between the Median Sale Price and Average Sale Price
The average sale price is calculated by adding all the sale prices for homes sold in a specific town and within a certain time frame and dividing that total by the number of properties sold.
Average Sales Price Example: 29 homes sold in a Lincolnville Maine last year, the average home price would be calculated by adding the sale prices for all 29 homes and dividing that figure by 29. Which creates an average sales price of $345,924.
The problem with the average sale price is that if one or more properties were sold at a very high or very low price, the average becomes skewed by that higher or lower home price. The median sale price, on the other hand, is the sale price in the middle of the data set when you arrange all the sale prices from low to high.
The median sale price, then, represents the figure at which half of the properties in the area sell at a higher price and other half at a lower price.
Median Sales Price Example: Using the same 29 homes that sold in a Lincolnville Maine last year, the Median sold price is $240,000
Is the Median Sale Price or Average Sale Price a Better Figure? It’s beneficial to calculate both the average sale price and median sale price to help you determine the ideal listing price when buying a home. In the Lincolnville examples above there is an over $100,000 difference between the median and average sales prices.
When you list the current listing prices in your area or the sale prices for sold properties, you can easily determine if there is an outlier that could be inflating the average price calculation. It’s important to take into consideration all figures.
For more advice on how to make the most money from selling or buying a home, contact a Dwelling in Maine Real Estate Agent. We can walk you thru determining the best price for a property in Midcoast Maine.