Relative Value Index (RVI)
Over the past months, we have developed an asking-price evaluation tool, called the Relative Value Index (RVI)
In order to correctly understand the Sarasota real estate market one has to look past most of the numbers - numbers like how many listings - how many sales - how many days on the market and analyze all of the variables.
It would be very easy to conclude real estate is slumping in Sarasota. By only looking at the number of listings, which are about 4 X's as many as a year ago & how long it takes a property to sell today which are about 90 -120 days vs. "immediately" in some cases a year ago- one would be incorrect in assuming the real estate market has gone "south".
The real picture of the Sarasota real estate market is not that it is over-priced. Rather it is over-listed. In other words, the asking prices in many instances are not realistic. In fact, they are obviously incorrect. This results in an abundance of un-sold homes, which the market will never absorb.
These sellers will have to reduce the asking price before the home will sell. In the Sarasota MLS system, approximately 200 units reduce their price each week because they were incorrectly priced in the beginning not because any real estate bubble is bursting. On March 7th of this year, almost 300 price reductions were reported.
The proof that a property is over-priced is in the number of days a property sits on the market with no showings and no offers. Such a property risks the chance of becoming "stigmatized". There are a number of reasons for this phenomenon. A seller today has to look at his property in terms of the relative value in today's market. If you purchased 12 months ago, the value is probably higher. After doc stamps and commissions, a seller of such a property is possibly only going to break even - still not bad.
No doubt 2005 was an exceptional year. Today, the rate of appreciation has backed-off the rates we saw in 2005. Many sellers today as well as many agents do not understand the market or are not accepting of this reality when they take a listing. It is my view many of the over-priced listings are the result of too many inexperienced real estate agents willing to take a listing at any price.
Two things need to happen. Sellers need to be realistic in setting the asking price and Agents need to walk away if they will not. You can be sure Buyers certainly will.
Over the past months, we have developed an asking-price evaluation formula, called the Relative Value Index (RVI), which analyzes the asking price of a particular property in today's market. This proprietary, mathematical equation has been extensively tested and is free to our clients.
