What Is it and Why Should I Care?
Without a clear understanding of the absorption rate it can be a challenge to sell your home quickly and for top dollar. If real estate agents use only "Days On Market" as a measurement for how quickly homes are selling, you may be in trouble.
You see, agents have found ways to manipulate the Days On Market measurement. It has become such a problem that the Multiple Listing Services are beginning to impose stiff fines of $1,000 or more for each infraction.
So what is the absorption rate anyway?
The Absorption Rate is the ability of the real estate market to sell off all of the listed for sale homes that are currently on the market. For example, if on average 50 homes are sold every month and there are 600 homes for sale then it will take 12 months to sell all of those homes. If there are 1200 homes for sale then the absorption rate would be 24 months or 2 years.
If you would like to sell in 12 months then you need to take the absorption rate into account. In the above scenario with 600 homes for sale, we know that only 1/2 of them will sell in the next 6 months.
To price a property correctly it would have to be in the lower 50% of the price range of similar properties in order for it to sell in the next 12 months. To sell in the next 6 months it would have to be priced in the lower 25% of the competition.
The above numbers are used as an example. To find out how current market conditions are impacting the absorption rate in our area call George today at 540.672.8019.
And remember, knowing your area's Absorption Rate, helps to track trends.
Understanding the market and where it is headed is part of our job as real estate professionals.
If your real estate agent can't tell you what the absorption rate is for your area and your home find another agent..
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