Definition
Contract-to-close ratio is the percentage of properties under contract that actually close. High ratios (90-95%) indicate stable deals. Low ratios (70-75%) indicate deal risk from financing, inspection, or appraisal problems.
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Contract-to-close ratio (or closing ratio) measures percentage of purchase contracts that result in actual closings. In strong markets, ratio might be 90-95% (most contracts close). In weak markets or markets with high inspection failure rates, ratio might be 70-80% (many contracts fail). High ratio indicates: solid deals, qualified buyers, stable market. Low ratio indicates: deals falling through from inspections, appraisal failures, financing issues, or buyer hesitation. Tracking ratio over time reveals market health: declining ratio might indicate problems (financing issues, over-optimistic pricing). Contract-to-close ratio affects seller expectations: in strong market with 95% ratio, your contract being signed is almost certain to close. In market with 75% ratio, signing doesn't guarantee closing. Buyers understanding ratio can negotiate more aggressively (if 25% of contracts fail, their offer is safer than it appears). Real estate professionals track ratio as leading indicator of market health.
Pro Tip
Know your market's contract-to-close ratio. If it's below 85%, assume meaningful risk that signed contracts might not close.
Example
Market analysis shows 200 properties went under contract in January; 180 closed. Contract-to-close ratio is 90% (180/200), indicating strong deal stability.