Brokers and agents cringe when a national report sings a song that is out of tune with their local markets. A neighborhood, small town, or specific development may perform quite differently than the county or Metropolitan Statistical Area (MSA). We live by the cliché “all real estate is local.” Data presented visually can help communicate that message and help prove that you are the neighborhood expert.
Here are a few key pieces of data that can help you succeed in both winning and pricing the listing:
1) Sold vs. Listed Ratio: How many properties go to closing?
Using your MLS data, you can provide a visual view of how inventory is moving through the marketplace. While not always a pretty picture, you can offer potential and current sellers a realistic view of how much inventory is selling and use the data to help decide how aggressive their pricing strategy needs to be.
How to calculate it: Add up the total number of properties offered on the market in a given time frame including all expired, withdrawn, and active listings. Then, for the same period add up the total closed sales. The sold vs. listed ratio is a simple side-by-side comparison of the two numbers. In most areas you can find these numbers in your MLS system or inside your local or regional sales reports released by your local association of Realtors®.
How to show it: A bar graph makes a robust and impactful statement of how the market has performed over time. Example A illustrates the offered vs. sold ratio for a sample market over a period of 12 months. The blue bar represents all properties offered. The red represents properties sold. Also, unless you can remove any properties which appear twice in your sample data, be sure to include a disclaimer that relisted properties might be counted multiple times.
It’s easier than you think to create a bar graph:
- Microsoft Word, Excel, and Powerpoint each have graph functions built in under the “Insert” menu.
- The National Center for Education Statistics sponsors a great site for making your own graph. Even though they say it is for kids, the exported graphs are great for professional use.
2) Absorption Rates: Who is in the driver’s seat?
Absorption rates are a long-standing industry data standard for defining the status of a current market and answering the common questions, “Is this a buyer’s or seller’s market?” and “In what direction are we trending?” Simply, the rate measures the number of months it will take to deplete the existing housing supply or the rate at which homes are being “consumed.”
When an agent tells a seller that the current absorption rate is nine months, meaning it would take that long to sell all units on the market, it often has little effect. However, showing it over time and comparing different areas can help sellers better understand how the hyper-local community is performing compared to the larger community.
How to calculate it: The absorption rate is determined by dividing the total number of properties available by the number of sales in a given month. The resulting number defines the number of months it will take to deplete the existing supply.
An absorption rate of six months is considered a balanced market. At five months or lower, the market is thought to be favorable for sellers. At an absorption rate of three months or less, sellers should be seeing lots of activity on their listing. If they are not, their property is likely overpriced for the current market.
How to show it: A plotted line graph is a great way to compare absorption rates over time. In Example B, the absorption rates were calculated for three communities and a county. The sample graph provides the absorption rates by month over five months. This shows not only whether or not we are in a buyer’s or seller’s market, but also how different areas are performing in relation to one another. The spikes on the graph show months when homes are sold at a slower rate, indicating that homes might need more aggressive pricing and marketing.
3) Market Presence
Sellers are often familiar with the names of agents in a marketplace who have the most signs in the yards, the largest ads in magazines, or the most banner ads online. These agent names are often top of mind with sellers. If you are one of these agents with a high number of listings or if you have purchased a large share of online advertising, you could show that by creating a pie chart illustrating your market presence by total number of listings or advertising share compared to other agents.
If you are Agent 1 in Example C, you could use this graphic to show your presence. If you are Agent 4, you may use this graph to show you have the time and attention to focus on a seller’s listing.
4) Closing Ratio
If you are successful in bringing most of your sellers to closing, share those numbers with emphasis. Your closing ratio as a simple pie chart, like Example D, can show the impactful relationship between your total number of listings taken and those that actually closed title during a given time period.
Your strengths and knowledge have value in today’s market. Identify them and extract and convert your numbers to simple graphs, like these, for maximum visual impact. Your sellers will “hear” what they see.