Wednesday, July 22, 2015

How LocValu Helps Decipher the Contribution of Fixed Locations in Product Pricing

The LocValu Invention

The LocValu (URL invention offers market-derived fixed location values for the major markets to help consumers understand the relative differences in values brought about by virtue of variations in location alone.

Currently, LocValu’s fixed locations represent Zip Codes within a market area, though the developer is planning on adding Census Tracts, shortly, as an alternative value node. Since the LocValu portal provides a generic solution, it will be extremely useful for individuals and businesses alike.

Here is how the LocValu portal will help consumers: If Zip Code X shows a median location value of 2.56 while a contiguous Zip Code Y carries 1.32, a potential homeowner would instantly know that the location value alone could make comparable homes in X significantly pricier than those in Y. Likewise, a potential storefront renter is expected to pay a much higher rent in X than in Y, while a multi-family developer would be willing to pay a higher price for a comparable parcel of land in X than in Y – all owing to the higher value of location alone.

Since these Zip Codes have been assigned statistically significant and market-adjusted location values, consumers will more comfortably accept them as their "mutual" choice of price differentials than the heuristic or opinion-based counterparts without a scientific base.     

In terms of the potential use by consumers, the possibilities are numerous. Homebuyers can re-price comps (without having to recollect new comps from the other Zip Codes of interest); tenants can re-price rents; apartment, office and retail management companies can readjust rents; home developers can market-adjust prices; reo-to-rental companies can verify portfolio prices; loan officers can (apply these location values to generic costs) to develop “first look” values; hospitality chains can validate room rents; insurances can verify rates, to name a few.  

Navigating LocValu

Graphic One
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Once a user selects a market from the home page (Graphic One above), the map of the market appears, with Zip Codes highlighted in Red. By clicking on a Zip Code user can see its median location value. A range is also provided to highlight the level of diversity within the Zip Code. Contiguous or a set of Zip Code values may be viewed by opening them up simultaneously (Graphic Two below).  Alternatively, a specific Zip Code value may be sought via the Zip Code box provided.

Graphic Two

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In order to view the color-coded heat map (Graphic Three below), the Zip Code boundaries must be turned on. The navigation mechanism, however, remains the same with or without the boundaries being on.

Graphic Three

 Click on the image to enlarge

A 3D surface chart (Graphic Four below) is also provided to offer a consolidated view of the entire market, elegantly displaying the locations of the peaks, troughs, plateaus and everything in between.      

Graphic Four

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LocValu Advantages

Today, LocValu is the most unique location valuation system available online to help:

1.   Individuals – they can use LocValu in many different ways: from validating comparable home sale prices across Zip Codes to verifying consumer price differentials (e.g., restaurants to beauty salons to movie theaters to daycare, etc.) due to location differences, etc.. 

2.   Retail businesses – while evaluating comparable retail business locations across Zip Codes, prospective renters can use LocValu to understand the true differences in market rents due exclusively to the differences in location. Likewise, landlords can use it to test the existing and set the future rent.  
3.   Apartment complexes – apartment management companies can effectively utilize LocValu to validate internal rent levels for similar complexes located in different Zip Codes. Since LocValu is an independent source, their rent variations might be easier to justify. 

4.   Banks and Mortgages – loan officers and mortgage underwriters in local banks and mortgage companies can use LocValu to develop market-adjusted cost approach values by applying these location factors to readily available cost factors. 

5.   Insurance companies – while developing the risk scores actuarial scientists can use these location values as control parameters.          

In a nutshell, the LocValu system offers a very uniform – and statistically significant – invention that provides a generic solution to the long-standing problem of valuing fixed locations, in clear contrast to the traditional opinion-based valuations without any scientific basis.

LocValu Press Release

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