Having two small children and several rescue animals I know how important the concept of absorption is- I need highly absorbent paper towel and napkins to clean up all their spills (they inherited their clumsiness from me). I also know that kids absorb information quickly so you need to be careful what you say around them because sometimes they absorb the "wrong" thing.
The concept of "absorption" is even more important in my career as a full time Realtor. Before, I ever put a home on the market I always calculate the absorption rate. Absorption rate is a concept and practice that is often over looked by many Realtors and lack of knowledge can lead to expired listings which everyone know is no good- it hurts the Seller, the Realtor, and can lead to poor sales results in an area.
So what is the absorption rate?
Just like the name applies, the absorption rate is a calculated estimate, based on current and past market trends, that determines how long it will take for Buyers to absorb (aka buy) the current inventory in a given area.
So what does this number tell you?
As a Realtor, I often have Sellers ask me how long I think it will take to sell their house. While I do not have a crystal ball or the ability to see into the future, the absorption rate can allow me to make an educated estimate of how long it will take for a home to sell based on the number of comparable homes on the market and the number of closed homes in a given time period.
The absorption rate follows the simple law of supply and demand. If an market area has 46 similar homes on the market and only 5 comparable home sold the past month that are has a current absorption rate of 9.2 months. In other words there is 9.2 months of inventory. Therefore if a Seller "needed" to sell within 3 months they better make sure that their price and condition were better than that of the competition.
Selling real estate is not about guessing- it is both a science and an art. Because both Jennifer and myself have advanced science degrees we thoroughly research market areas both before and during our listing periods as good knowledge of the market is critical in selling a home and allowing Sellers to get the most money out of their homes and to sell in the shortest period of time.
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www.HomesForSaleKnoxville.com
Visit Christine McInerney and Jennifer Halinkowski with Keller Williams Realty on-line at:
www.HomesForSaleKnoxville.com and www.KnoxvilleReal-Estate.com
Office: (865) 694-5904
Christine (865) 237-5289 and Jennifer (865) 621-3658
Mail to: McIn-Kowski@HomesForSaleKnoxville.com
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Christine/Jennifer,
As an appraiser we now have to provide the 1004MC form with our appraisal that provides all this information. While it is something we have done "behind the scenes" in the past we now have to show this information on the new form. Absorption rates are very importmant when determining market value. We have to not only analyze past sales but also what is currently available for sale and what the subject property has to compete with. Thanks for shining a light on this often overlooked concept.