This is NOT hard...........I am not a math person, and I have found this easy to use. It helps when listing homes to be able to tell a seller a resonable time to get the home sold.
1. Days on Market (DOM)
- sellers need to know how long it is going to take their home to sell
- Knowing the days on the market is critical for you as a Realtor to know how long it takes for each area in your community to sell.
- Days on the Market gives your sellers realistic expectations.
In Ann Arbor the Days on the Market can not always be accurate.Therefore it is important to look at the history to see if it was listed again, withdrawn or re-listed.
Some agents withdraw and re-list, right?
So how can you know what the real number is?
This is a formula that I obtained from Mike Jones and it is easy to follow.
Just use the absorption rate to calculate the true DOM for your area.
Here's how you get the real days on the market for your sellers.
Find out how many homes sold in your market last year and how many are currently on the market.
- For example, if 50 homes sold last year, and there are currently 100 on the market, what those numbers indicate is that the inventory turned twice last year (50/100= 2.0). There are twelve months in a year, and 12/2.0 = 6.0, which is the absorption rate, meaning that the average time actually on market is 6.0 months.
- So to convert the absorption rate to days on market, you simply multiply this last number by 30 (6.0 x 30 = 180).
If you figure DOM this way, you'll eliminate all manipulation in your market by builders and agents who re-list stigmatized homes, which of course are those homes that have picked up a negative image due to their excessive time on market.
Drill this down for the house that is located in a neighborhood the home is selling in.
2. Average Markdown (List to Sale Ratio)
- You need to be able to advise your client as to the amount of negotiating occuring in that market. Let's assume that the average listing price is $200,000, and the average sale price is $175,000.
- subtract the average sale price from the average listing price, and then divide the difference by the average listing price.
$200,000 - $175,000 = $25,000
$25,000/$175,000 = 15% markdown aproximately.
In other words, your client should understand that it's normal in your market to expect a markdown (or discount) of 15% from the listing price.
- This prepares your sellers for what the offers might come in at.
- When you receive and offer you will be able to negotiate with the understanding if it is within the guidelines of that neighborhood.
- By going over this at the beginning your sellers will know the List Price is not the offer or sales price.
Missy Caulk & Team can be reached at 734-216-2822 or email: Missy@MissyCaulk.com
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