Posted by: Todd Long | September 22, 2008

Pricing Your Home to Sell-Part III

Absorption Rate Analysis

 

In my opinion, here is the beginning of what sets our agents and other great agents apart from the crowd!  As we have previously discovered a CMA studies what has happened in the past 6 months to a year in the real estate market relative to the your home (the Subject Property).  Now we are going to discover what buyers are doing in a given area and price range right now with an Absorption Rate Analysis.  An Absorption Rate Analysis tells you how fast the Subject Property should be on the market based on the CMA determined Fair Market Value or FMV. 

 

Yes there are a lot of acronyms used in Real Estate, as I guess there are in any profession.  If you ever run in to one that you don’t know, just Google it.  Back to the issue at hand. 

 

To do a proper Absorption Rate Analysis you take a look at activity only over the last 2 months in a given price range and given area.  Take the total Pending and Sold divided by 2 months to get a number of homes sold per month.  Then divide that number by the total number of Active properties available to a buyer in that price range and area.  This tells you that if no more properties come on the market and buyer continue to buy the same number of houses per month all properties will be sold in this given number of months.

 

I know this may sound a little confusing but it is much simpler once explained in addition to the Century 21 Hecht Realty Absorption Rate Form.  Also, this is something that you should have updated monthly to determine which way your market is moving.  For example, if the Absorption Rate number is getting larger it is trending toward a buyer’s market.  If the Absorption Rate number is getting small we are moving toward a seller’s market. 

 

Stay tuned for a look at the Pricing Triangle to pull all of this pricing information together for a clear picture of where your home should be positioned for your given objective.

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Responses

  1. Homes tend to sell 3 months of the year, the 3 months before the official moving dates… get another job meanwhile


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