“Criterion #1: Numbers Make It Work. It’s important to choose a neighborhood that has 150+ similar properties in the same geographical area because it makes communication much easier. (In some locations, you can’t find 150 properties in one community/subdivision, so you may have to include other geographical areas to create a sufficient number.) Without 150 or more properties, there may not be enough annual sales to make your efforts profitable. For example, I just did a study on an area that has around 80 homes but only 4 sales per year for the past 4 years this area is not worth the effort because it’s almost impossible to get 100% of the sales.
Criterion #2: Choose the Right Price Range. The right price range is the one that consistently has sufficient sales and with which you are compatible. Keep in mind it may not be the neighborhood that necessarily has the higher-priced homes in your area, but instead the one that has sufficient sales at an average price that makes the effort worthwhile. One of the outstanding features of farming is that you can direct the effort at where the market is HOT and not at where the market is NOT. My suggestion is to do an Absorption Rate study on the areas you’re considering to factually determine how many houses sell per year and the amount of inventory on the market. Remember: if there is more than 6 months of inventory, it’s a Buyers Market, and if less, it’s a Sellers Market.
Criterion #3: Turnover. You’re looking for a turnover rate of no less than 7%. The calculation for that is:
total houses sold in the past 12 months = turnover percentage
total houses in the farm area
For example:
12 houses sold = 8% turnover
150 homes in the farm
There are some exceptions to this turnover figure. For example, if the average sales price is $1.5M, or conversely if it’s $55,000, you may want to make some adjustments in your thinking and in the suggested turnover percentage. However, when you go below 7%, you can be in the danger zone.
Criterion #4: Competition. In most communities there are enough areas to farm without having to select a neighborhood that is already overloaded with farming agents or dominated by a Top Agent.
Criterion #5: Compatibility. Many of the farming agents I know started their farm in the neighborhood where they live. This makes a lot of sense to me because you’re there everyday, you have a vested interest in the neighborhood, you begin with advocates in the community, and you don’t have to go anywhere to make contacts because your fellow homeowners see you on a continuing basis. It can be the perfect farm. However, choosing a farm area or a price range where you have limited or no contacts and one in which your real estate office has had minimal success can be a daunting task, but it’s not impossible for an experienced agent with sufficient marketing skills who knows it’s the right fit.
Source: realestate_iq
