Applying Einstein’s theory of relativity to your home valuation

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how much is my home worth right now

Ask yourself, what if, the famous genius Einstein sold homes.

The same genius responsible for the theory of relativity and proving that time is not constant…

Or in layman’s terms, time travel is POSSIBLE.

Welcome to the ultimate in market valuations, knowing EXACTLY what your home is worth.

Einstein’s home valuation

From what I understand Einstein’s theory shows we can slow or speed time relative to another point in space based on velocitiy with respect to that other point.

Is that clear?

The faster you go, the slower time passes for you. Specifically slower than the object you are traveling away from.

So if I jump in my time machine, and jet away from you, I will travel into your future. At this point I can look up the price your home sold for.

Only problem is, I’m STUCK in the future with no way back to provide you the precise market value for your property.

And of course this COMPLETELY ignores the fact that having that information would alter the future anyways. We need to resurrect Einstein to figure get the exact market value for your home. We have devised a slightly more PRACTICAL way of establishing a value for your home.

It does involve time but no my friend it does not involve your Zestimate or time travel.

Going back in time / appraisal value of your home

Appraisers are stuck in the past. Specifically the past 6 months. Since they don’t have a time machine they look at the next best things. Homes similar to yours that sold.

So what exactly is a similar home? First, it’s homes close to yours preferably within 1/2 mile. Second, it’s homes with the fewest differences aka adjustments.

To account for the differences in home that sold they add in or subtract the cost of various home features, for instance 4th bedroom, 3rd garage stall, larger lot, etc. These costs are done through a complex market analysis and saved as adjustment values.

This method is not fool proof, however, it is VERY consistent for track homes and large communities with similar construction. Regardless it cannot be ignored. Ignoring appraisers mean shutting out a vast majority of the market who needs to finance their home purchase.

What will my home appraise for

It’s not terribly difficult to get an idea of what the appraiser will come in at without access to all their fancy adjustment values and lengthy analysis.

Step 1: Look back at last 6 months sales within a 1/2 mile radius of your home.

Step 2: Search for homes with same number of stories, bedrooms, bathrooms, garage spaces, home square footage, lot square footage, home age, and general construction.

Step 3: if you have 3 homes you’ve hit the jackpot. If not open up your search criteria until you have half dozen or so homes in the mix. Still no luck? Expand out your search radius.

Step 4: look through the search results to see which homes are most similar to yours. These are the ones the appraiser will choose for his valuation. Your home will be similarly priced to those.

The only piece remaining is to figure in the adjustment values, this takes a methodology for doing so varies from appraiser to appraiser.

The present / active market valuation

Buyers cannot purchase homes that have already sold… Unless we resurrect Einstein.

They do the next best thing, they look at purchase homes in the present. Homes currently listed for sale.

Buyers are looking for homes with certain key criteria… bedrooms, bathrooms, stories, garage spaces, near work, etc. It’s icing on the cake if they can get anything that exceeds their criteria for the same budget. Say a extra bedroom, guest house, extra garage stall, etc.

What will a buyer pay for my home?

When valuing your home from the buyer’s perspective we take your key features and pare the market down to homes with those specific features or BETTER, and under a price cap. Say we feel based off the apprasail style search the best you can get is $150,000 then the price cap would be that. If better homes show up for less than your cap then you’re price on the market is pushed down.

Step one: to start your search select your community, if under 500 homes expand map out.

Step two: look at the active market, filter it down to homes that have similar or superior features. Specifically at least as many bedrooms, at least as big, at least as many bathrooms, etc.

Step three: cap the search to a set price, preferably no more than 110% of the highest sale seen in the appraisal search.

Step four: under half dozen or so results? Expand out your search area.

Step four: See what homes come up. This is your competition, who will cap the price you will be able to list your home for.

Selling your neighbor’s home

You have an intuition that your home is worth more even though, similar homes or homes offering more than yours sold for less.

What you are proposing requires a time machine because all we have to go on is past, and present values. We have NO idea what the future has in store.

I do know if you choose to price higher than market value you risk,

Waiting a very long time for market to come up,

Inventory sells out and nobody new comes on the market (unlikely). This takes years. In the mean time you are paying taxes, utilities, mortgages, insurance, etc. Any extra earnings you would realize are likely ate up in these costs.

Watching prices fall as your home sits on market,

Inventory continues to sell and new inventory comes on market (likely). As sellers compete with each other they lock in low sales prices. Appraisers look at these lower sales and lock the market values as transactions close. When you get a financed offer, your stuck with a lower sales price.

You may say you will hold out for a cash buyer who will ignore the appraised value (very rare). In doing this you shut out a VAST majority of the market / buyers financing their purchase.

In the end you have to drop your price MUCH lower than the original comp to get your home sold.

You become overly financially and or mentally burdened by home,

It hasn’t sold for your price. You end up dropping the price to FAR below market value to get rid of the home. Or you end up foreclosing.

Moral of the story – You are selling LOCATION

They say real estate is about Location Location Location. It’s actually about Location, Condition, and Price. The TOP priority to buyers being Location. You cannot outperform your market / location even if you feel the condition of your home is far superior than that of your neighbors because buyers are FIRST and FOREMOST buying the location. Condition gives you a competitive advantage but is not a magic wand to get you above your market price / value.

Tracking your value

Watch the appraisal and buyer searches. As new homes come on and off the market update your value accordingly.

Home goes up in value: sold properties AND active market goes UP in price

If your home goes up in value updating your price is not as important. A lower price will, get your home sold faster, or create a bidding war between buyers to raise your price back to market value.

Home goes down in value: sold properties OR active listings go down in price

If your home goes down in value it’s important you act immediately before appraisers lock in the lower market values.

Fine tuning your value & price adjustments

In the event you ever do have to do a price reduction you need to make it count. Slowly reducing price by a couple percent does nothing.

You need to bridge the gap between buyers & sellers in your market. That is, the Original list to sold price ratio. This tells you exactly how much buyers are purchasing homes for and how much sellers had to reduce their price by to get the homes sold.

This gap varies. Typical numbers for Southern Arizona are 5% to 10%. You have to EXCEED the gap when you reduce your price.

By crossing that gap you are able to get into the price range where buyers are purchasing homes. Ignore it and you will simply sit on market with other homes that have not sold yet.

What you need to do right now

Until I finish inventing the time machine this is how to price your home…

Gain access to reliable market data (straight from MLS) as follows,

  1. An appraisal style search
  2. A buyer style search
  3. whole community search (optional)

Get immediate notifications via email if there are any updates to your searches / the market.

Base your sales price off of the lower of the two valuations, Appraisal or Buyer.

Need to do a price adjustment?

Adjust your value by MORE than the marketplace’s original list to sold price ratio / price differential between buyers and sellers.