Telling sellers the price they want to hear
may get you the listing, but it won’t sell the home. Only pricing the
listing right will do that. And the right price depends in large part on the
current absorption rate in your market. Here’s how you find that:
- First,
determine the number of homes closed in your market over a specific period, for example a 12 month period. You can get this data from the MLS.
- Next,
divide the number of homes by the number of months in the period — in this
case, 12. This calculation gives a per month absorption rate.
- Last,
divide the rate into the number of current listings still on the market. This yields the
months’ supply of homes.
Six months’ supply is considered a balanced
market when the number of listings roughly equals the number of buyers.
Numbers over six represent a buyers’ market and those below a sellers’ market.
To assess sales trends, you can also calculate supply over shorter six and
three month periods. Price in real estate is mostly a matter of supply and
demand, just like in every other industry or business.
Once you have these basic calculations down, you can focus on absorption in particular neighborhoods or price ranges.
Showing clients local absorption rates will give sellers the information they
need to price their homes to sell. Once they’ve arrived at a price, you can
decide whether you want to spend your marketing dollars selling it. If they
don’t price it realistically (literally and figuratively - pun intended), then seriously consider taking a pass on the
listing and focusing your time, energy and resources where there is a higher probability of a win-win or mutually beneficial working relationship together. See my previous articles entitled;
Calculations can also be done to assess the
the odds (or risks) of selling any one home. Even in a hot seller's market,
it’s rare for more than 50 percent of homes to sell. To make this calculation:
- Search
the MLS to determine how many transactions have closed in the last six
months.
- Divide
that number by the number of new listings that came onto the market
during the same six months. (Don’t include listings that expired and then
were re-listed.)
This equation gives you the percentage of
homes entering the market that actually sold. For example, if 100 homes sold
and 200 were listed, the odds of selling are 50 percent....
