How Does Technical Stock Analysis Help Sell Real Estate?

That title seems like an odd relationship, but it is typical of a creative real estate investor. Creative solutions solve problems and put more money in your pocket.

When I was a developer buying hundreds of apartments and converting them to condos, one major dilemma involved how to accurately determine the sales price of properties in line with the market- a study that was more technical rather than art. The art of establishing the final sales price still remains, but there is also a technical analysis I can perform using MLS data to establish peak market values for homes in an area that are of a similar renovation condition.

Sounds intriguing doesn’t it?

Well, maybe not so much to you, but having been a Rocket Scientist in a past career, I still enjoy the number crunching. It’s why I am working with investments more than the emotional sale of a home to live in.

In technical stock analysis you have pricing trends on stock in a company. All shares are the same and all have the same value at any given moment in time. The only difference is the buying and selling of individuals and their individual perceived value of the stock.

Housing can be reduced to almost the same thing. The only difference is that there is a range of quality of the underlying asset which you don’t find in stocks. The upper end properties are fully remodeled with great layout, nice yards, great schools and shops etc.

However, in given neighborhoods or areas, all the neighborhood amenities are the same. The houses are typically of the same style and age and the lots are generally about the same as well.

Hmmm. What does that leave?

It only leaves the house itself, its size, and renovation condition. Of course, there are always outliers such as a large corner lot or the house that was built 50 years before the neighborhood was developed, but by identifying the boundaries of the similarly or homogenous houses, the primary cost driver in a neighborhood is the size or square footage.

Ahhhhh. It is getting simpler now.

If you have two houses in the neighborhood, 1500 SF built around the same time and similar layout with 3 bedrooms and 2 baths and similar lots, but one is fully renovated and one has not been touched since the day it was built 50 years ago, you will get a spread in prices. This is merely the quality spread and can be charted to identify neighborhood values and project home values in the neighborhood for any home of any size and any condition.

Of course, you do have to make special adjustments for unique features, but those are easy to adjust for once you have the base value of truly comparable homes.

Why is this better than three comps from your average Realtor? The primary difference is that I can take any three “comps” to create any story I want. With my charting method I am able to have compelling information which enables me to debate price with appraisers and buyers as well as sellers and it gives a market perspective that is far more compelling than the three comp method.

I still use rent per SF and size of the property to identify good and bad values and there are many ways to increase revenue to increase value that we look at to determine value.

However, knowing that the real estate market is collectively smarter than any given individual, I use statistical analysis methods to gather data in an area for the property type and so I have a specific reason for my valuation which gives us a strong negotiating point no matter which side of the fence we are on.

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