Absorption Rate

In real estate terminology, the absorption rate is the rate at which homes are being sold in a particular real estate market during a set period of time. You can calculate the absorption rate by dividing the number of available homes in a specific market by the number of sales per month. The result gives you the number of months that it will take to exhaust the supply by selling the currently listed homes. Whether you are a seller or a buyer, the absorption rate may have an effect on the value of a particular home. By providing strong legal representation, the Boston real estate lawyers at Pulgini & Norton may be able to help you determine the absorption rate and achieve your objectives.

The absorption rate may have an impact on home prices going forward. However, it does not take into account any homes that may come onto the market in the future. When the absorption rate is high, it is considered a seller's market. This indicates that the supply is dwindling quickly, which means that a homeowner may be able to sell their home in less time. It may also tell a buyer that he or she needs to submit a better offer in order to be competitive. However, if the absorption rate is low, it is usually a sign of a buyer's market, in which homes are not being sold as quickly.

The absorption rate allows buyers and sellers to determine an appropriate value for a particular home. Often, sellers over-value their homes, and the absorption rate allows them to understand that they need to list a home for a lower price than what they think the home is worth. In some cases, an absorption rate slows, and this information allows a seller to understand that they need to lower a listing price. Conversely, when the absorption rate increases, a seller may be able to list a home for more than they expected because the demand is good. Similarly, a buyer may not understand that homes are going quickly and may not understand that they need to submit a much higher bid.

Appraisers also consider absorption rates when trying to accurately value a home. Appraisers for Fannie Mae or Freddie Mac home loans must consider absorption rates in their valuations. They need to look at absorption rate trends in the market and compare the numbers over time with how the market is currently doing. When an appraiser sees that the absorption period is long, they can adjust their appraisal accordingly to account for slower sales.

As a homebuyer or seller, it is important to understand how the absorption rate may affect the value of a home. At Pulgini & Norton, our Boston real estate attorneys can help you negotiate to buy or sell your home and represent you from start to finish in the process. Our attorneys also advise and represent buyers, sellers, associations, and lenders in Cambridge, Andover, Brookline, and other Massachusetts communities. Contact Pulgini & Norton at 781-843-2200 or through our online form to set up a consultation with an experienced property transaction attorney.