YES!!!!!!!! The Valuation Tool is Working!

[photopress:cards.jpg,thumb,alignright]The other day when I wrote this article regarding “THE” Valuation Tool, I was talking about the one in my head.

When training new agents I give these instructions.  Go to Broker’s Open Houses and Sunday Open Houses and vacant properties.  Keep a three ring binder and put a printout of each property you visit in the binder.  As you go through each property DON’T write down how you “feel” about the house and it’s asthetics (it takes a while to break that habit, BTW).

Answer these three questions at each house and write your answers on the printout in your binder:

Will it sell? 

When will it sell?

Will they need to have a price reduction before it sells?

You don’t have to be an agent to practice the art of valuing homes or to perfect the “Valuation Tool” in your head.  You just have to remember to step away from the computer at least 30% of the time.  Data only goes so far.  You have to stand on the land and walk through the house to truly establish the basis for valuation.

I chose “a house of cards” for the photo here, and this particular mish-mash of card formations, in the hopes that “a picture speaks a thousand words”.  The big tower of cards, when valuing real estate, is somewhat interdepending on the smaller tower, and the ones scattered around the table are also somewhat dependent on the cards as a whole.  If you can buy this house with a view in Kirkland for X than this house in Woodinville can’t be Y and this condo in Redmond can’t be T.  Everything values off everything else, until it doesn’t.  These are called market areas. 

Sultan’s values are not dependent on downtown Bellevue.  Shoreline’s values are not dependent on Federal Way.  King County, for valuation purposes, is not a “market segment”.  Market segments are created by buyer consumers and not sellers or agents.  If enough buyers are ready to pay X here vs. X there, than that becomes market value.  If no buyers consider Federal Way vs. Redmond, than those two areas are not interdependent as to value.

I tell the agents that when they look at their binder and their answers are 75% correct, they should throw a party.  I also tell them to NEVER, EVER give up the binder until they can do those calculations on “auto-pilot” in their head.

So why the big Herbal Essence YES!!!!!!!!!!!!!?

I took an agent out to do this exercise on Sunday.  I walked through one property listed at just under $1.6 million.  I said this will be gone by Friday.  Today is Friday.  SOLD STRIP IS UP!  The one I said wouldn’t sell is not sold.  The one I was iffy about…have to go check that one, but I don’t think it will be sold until after the 20th, if then, so I’ll go check it at month end.  I expect it to be sold by month end.  I gave the listing agent a couple of things to do so it would sell by month end, I’ll go back and see if it’s sold.  If it isn’t sold, I’ll go see if they did the few little things I told them to do.  Price was right.  Shouldn’t need a price reduction.  Just a couple of showing condition tweaks.  Without those tweaks it could sell for $150,000 less.  We’ll see what happens.

It is a fabulous exercise to predict and stay on top of home values.  Anyone can do it.  You don’t have to be an agent and it’s great fun.  I highly recommend it for anyone considering buying or selling property in the next three years.  Get started now.  It takes some longer than others, but it’s aways a fabulous undertaking for anyone interested in property valuations.

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: cell: 206-910-1000

2 thoughts on “YES!!!!!!!! The Valuation Tool is Working!

  1. P.S. The reason this is an important exercise is when a property is “New on Market”, we have to quickly determine if a buyer should make an offer, what that offer should be, or should they wait for a price reduction. You can’t do that as quickly as a client needs you to do that, if you need the market to tell you into the future, what the price should be. If you have to wait for multiple offers to say “this house is worth at least asking price”, then your client gets into a bidding war. Some of the best values equals “Early bird gets the worm”. So jumping on undervalued properties is an artform.

    One of our agents had a client interested in a property that was difficult to value. I RAN over and WALKED out. The asking price was too far away from value to make an offer. Other considerations of course. Yes, it was a good house for the client, but it was overpriced by $75,000 to $100,000 which was more than 10% of asking price. Time to hang back a bit and get the client’s current property ready to list. Not time to make an offer.

    Step 2 after seeing a house is not always “make an offer” and I can’t know what Step 2 is until I see the house. So far her home is almost ready to list and the target house is still not sold. By the time we make that offer, the seller will be moving down from asking price mentally. Best time to make an offer is just BEFORE they do the price reduction.

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