Numbers, Statistics and Using The Absorption Rate

The average real estate agent usually isn't a numbers person. There are some numbers that are becoming close to essential if your real estate marketing efforts are going to have time to succeed. The good news is that nothing that you do takes calculus.

The essential math that you need to be using is the absorption rate. A simple explanation of the absorption rate- Based on the number of the houses on the market now and the rate of sales recently made, how long could it take for a property to sell or how if no other properties came on the market. Another way to think of the absorption rate is a real estate law of supply and demand.

You can use particular price ranges, areas, house features, whatever you want. An easy example would be if there have been 12 Maple models sold in the last year and there are 12 on the market there is 12 month supply of houses. It takes the market 12 months to absorb that many Maple models. The figures are probably worse if you use the statistics over a shorter more recent time period. If only 2 of those 12 sales were in the last 3 months then there would be a an 18 month supply. 2 sales per quarter times 4 quarters in a year equal a rate of 8 per year and there would still be 4 houses to sell which would take another 6 months to sell at this rate.

Why should you use the absorption rate? Sellers don't realize the state of the market since they aren't so involved with the market. Typical seller-My neighbors house sold last spring in 2 weeks and my house is better, so it should sell right away and for more money. Properly used the absorption rate shows the change in the market (of the 12 sales 8 may have been in the 1st 4 months of the year and only 4 in the last 8 months), the odds of success and paints a realistic picture of the sellers chances.

The absorption rate can be used to set the price. Try different price ranges- houses between $350,000 and $400,000 may be selling better than houses between $400,000 and $425,000.

The absorption rate is based on facts and not opinions. The odds of being shot as the messenger go down.

You can present yourself as a professional on top of the market.

Now go out and practice. Start with your own house. Run some numbers. Put them on paper and look at them. Explain the numbers. Now try someone else's house or one of your listings. After a short time it becomes easy. There are many forms out there that will just let you plug in the numbers. If you can't find a form or still don't understand, send me an email or call me and I will walk you through it.

Using the absorption rate will give your real estate marketing time to work and present you as the expert. This can also work with buyers in the right circumstances. You are now a real estate math expert.