Last But Definitely Not Least Important Step

The way I would do the check is like this:

             |   7549  ^
    subtract | - 3958  | add
             | ------  |
             v   3581  |

I just add upward, as if it were

                 3581
               + 3958
               ------
                 7549?

“If you have something to sell and want to find out what it’s worth . . . try to buy more.”

–Ross Kaplan’s first law of determining market value.

W-a-a-a-y back when, I remember my elementary school teacher exhorting me and my classmates to “check our arithmetic” when we did subtraction exercises.

How do you do that?

By adding the two numbers back together to see if they equal the starting number (in technical-ese, the difference plus the subtrahend should equal the minuend).

Starting at the End

What’s the equivalent in appraising residential real estate?

After identifying the three best Comp’s (“Comparable Sold Property”) and running adjustments on them to get a suggested selling range . . . test that range on competing, “Active” listings.  See, Proper (and Improper) Purposes of Realtor Previews.

In other words, look at the market through Buyers’ eyes (admittedly, easier for agents than less-than-objective homeowners*).

In fact, that strategy works for anything someone might want to sell.

Direct Competitors

If Buyers can get a nicer house for less than the CMA’s suggested price range, the about-to-be Seller and their listing agent need to re-think things.

However, if the CMA is right, the suggested list price should position the home, well, against, competing homes.

As I like to tell would-be Sellers, when two, nearby similar homes are for sale, there are only two possible outcomes (at least in the short run):  Home A’s asking price helps sell Home B, or, Home B’s asking price helps sell Home A.

*Years ago, out of sheer frustration, I invited a recalcitrant Seller to view nearby “For Sale” homes with me to explain why — after several months of market time — his was failing to sell (or even attract showings).

Two hours later, after viewing three “For Sale” homes that put his to shame, the would-be Seller got out of my car and announced, “I had no idea my house was so desirable.  I want to raise the price $25k!”

I talked him out of doing that, but wasn’t able to persuade him to reduce his price.

Neither were the next two Realtors.

Eighteen months later, the home finally sold for $150k ($30%) lower than his original ask.

I didn’t get a commission out of the deal, but I did get this blog post:  see, “Realtor Prayer Revisited.”

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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