Perhaps you’ve heard someone tell you how much their vehicle is worth, the value of their piece of jewelry, or a certain collectible? In order for something to have a particular value and be worth a certain price, you have to have a buyer for it.
The more unique your jewelry or collectible is, the smaller the percentage of buyers you may or may not have; which reduces what someone will pay for it. That is why “comparables” are so valuable because it is not an arbitrary value, but one that shows the past history of what a buyer actually paid for a similar property. No guess work or prejudice is involved; simply the facts and actual numbers of what one buyer paid one seller for their particular piece of real estate. If that doesn’t determine value, I don’t know what does!
Even though it may appear that houses & properties, neighborhoods & zip codes may be all over the map, if you step back and look intently and over time, you will see patterns & trends in values of real estate. These patterns and trends can be over a particular time frame, e.g. seasons of the year; a particular style house e.g. split foyer, 4 bedrooms, etc.; or a certain zip code, street or neighborhood in a town.
And when you start to see what the norm is, you also see the anomalies. You can determine when a house is overpriced, or better yet, underpriced. It will literally stick out as a property that when compared to the “comparables” is less than what it should be.
Even though all houses are unique in one way or the other on the micro-level, on the macro-level they are also commodities. A particular 3 bedroom/2 bathroom/2-car garage house with 1800 square feet & a pool should sell for approximately the same as another identical house on the same street – all things being considered.
All things being considered is also known as rehab costs. What will it take to bring the subject property in line aesthetically with the comparable houses?
At Rich Dad Education, we call this: Segmenting the Market and Scanning for Equity and is the foundation of our new CORE Class. We teach you how to break your market down and how to find deals. The next & final step is the deal mechanics – close deals with the appropriate strategy. Not only do we teach you how to do this from the comfort of your own home, we have created proprietary software that does this in seconds, allowing you the time to focus on your highest & best use.
We have taken Real Estate Investing and created a step-by-step SYSTEM that, if done correctly, is fail-proof. And we call it CORE.
Yes, it truly is amazing!