October 17, 2015 by Jeff Lowen
When you think of ‘Absorption,’ what comes to mind? Water, spills and how many sponges or paper towels you’ll need to soak it all up? Well, be that as it may, what I’m talking about here is how real estate gets soaked up. You may have heard of a “CMA,” or Comparative Market Analysis, right? Any real estate agent can provide you with that. Nothing life-altering, just a few properties that the agent picks out to give one an idea of what properties have sold for, a few that are for sale now and a few under contract. A CMA is really nothing more than a doctor letting you hold the stethoscope while you breathe. It helps, but tells very little of the big picture. We’re going to cover what an Absorption Report for your home is, and how it begins to build the foundation for your home’s value in the marketplace.
Before we dive into it, let me share that in addition to an Absorption Report, we’ve identified 115 other variables that are extremely important when considering, preparing and positioning your home for sale in any market. That is, if you’re interested in maximizing your bottom line on the sale of your home. (= $$$)
Noun: absorption 1. The process or action by which one thing absorbs or is absorbed by another. In other words, how your home gets absorbed by the market. Calculating an ‘Absorption Rate,’ which is the rate at which available homes are sold in a specific real estate market during a given time period. It’s calculated by dividing the total number of available homes by the number of sales per month. The figure shows how many months it will take to exhaust the supply of homes on the market. The higher the absorption rate, the faster the supply of available homes will sell.
Let’s break it down. For example, suppose that a city has 1,000 homes currently on the market to be sold. If buyers snap up 100 homes per month, the supply of homes will be exhausted in 10 months (1,000 homes divided by 100 homes sold per month). If a homeowner wants to sell her property, she knows that half of the market will be sold out in five months. This doesn’t take in to account any additional homes that enter the market, which can be added to the equation with the ‘Supply Rate,’ or the anticipated number of homes entering the market over a specific period of time. Also, the absorption rate can be a signal to developers to start (or stop) building new homes, as well as answer the age-old question, “Is now a good time to sell?”
Absorption Rate + Supply Rate = Speed of the market
All this is great lip service and eye candy for some, but only begins to tell the story. Now that we know how fast the market is, we’ll need to drill down to see how it affects your particular home and how it stacks up with market demands. Remember those 115 variables I mentioned earlier? Does it make sense to remodel the kitchen? Add a deck? Sell ‘as-is? You won’t want to throw good money after bad, and definitely won’t want to spend $1,000, if you’ll only get $1,000 return out of it, will you? We’ll need to dive into these 115 variables, separated into seven categories to determine how we can position your home for the best return for you.
Stay tuned… and strap in! 🙂
In case you’d rather not wait and have a home you’re thinking about selling, just let me know with the form below: