Tuesday, March 29, 2016

Homequant Pitch Deck

Thursday, March 17, 2016

US Housing Returns to Linear Growth after Consolidation

Tuesday, March 15, 2016

Home Buyers MUST Validate Home Values at Self-directed Sites

Instead of either accepting some model-driven estimates from online brokerage sites (we all know those estimates are not explainable) or blindly relying on salespeople's comps, prospective home buyers MUST do their own validations at Self-directed Sites. A Self-directed Site will allow users to go through the valuation process in a step-by-step manner via the following FOUR steps:

1. Defining the Subject:  Subject property data from Public Records is often unreliable. As a homeowner, you know your home better than any such records. In Self-directed Sites, you can define/enter your own home data, without being forced to accept the data from Public Records. Here is an example of the basic subject data that you would be entering into a Self-directed system...

  (ONE Click on the image to enlarge)

2. Selecting Comps:  A list of sales - by default - does not become comps; nor do some cute model-derived estimates provide true home values. Comps - however close they are to the subject - require proper selection and adjustments. In a Self-directed Site you will get to enter your own comp selection and adjustment criteria. Here is an example...

3. Ensuring Proper Location:  The concept of Spatial comps (picking comps right off the map) is always a better way as it helps avoid picking comps from the "other side of the freeway" which could be a pricier economic neighborhood, thus inflating the value of your subject. Here is an example...

4. Understanding Final Value:  A statistically significant range, say 25th to 75th percentile, is a more meaningful way to understand comps-based subject valuation than one unique parameter.  Here is an example...

You may try out your subjects at the Homequant site. It is absolutely free and requires no registration whatsoever...


Home Buyers MUST Verify Appraisers Values in Four Easy Steps

Step 1 - Verify Subject Info

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Subject Info is often inaccurate in Public Records so verify it. For example, our subject property - a single family home - is located in N. Las Vegas, with 1,400 SF building area, 30 years old and sits on a 7,000 SF lot.

Step 2 - Verify Comps Criteria

Sales must be properly selected and adjusted to become comps. In this example, sales within one mile radius and 20% of the Subject's physical attributes (Land, Bldg and Age) are considered to be comps. Also, all comps are adjusted for time (sale dates) at 1% growth per month and are projected out to 12-31-2014 (a tentative purchase date). Therefore, the Subject will be valued as of that date.

To converge all Comps to the Subject's physical attributes, they are adjusted at $10 per Land SF, $100 per Bldg SF and $1,000 per Year of Depreciation. If the subject is located in a pricy neighborhood, increase the adjustments as appropriate.

Step 3 - Verify Final Comps

From a pool of ten Comps - based on the selection criteria set forth - five most recent ones are chosen. Closest distance and least adjustment are the two other selection methods. Before finalizing, always take a look at them spatially (on the map), as the comps from the "other side of a major artery/freeway could be inappropriate." Here are the comps spatially:

Step 4 - Verify Valuation

The final five are producing the subject valuation. While the Median Adjusted Sale Price (ASP) is the most probable value for this subject, 25th to 75th Percentile range is the most probable range. Alternatively, an investor may consider up to the 25th Percentile, while someone bent on outbidding the competition to acquire the property could start above the 75th Percentile. It is therefore quite relative. 

Now, try out your own subjects at our Homequant site. It is absolutely free and requires no registration whatsoever...


Home Buyers MUST Use Five Best Comps to Value a Subject

In this example, the subject (a single family home) is located in Orlando, with the following attributes: 15 year old and 1,500 SF of bldg area on a 6,000 SF lot. 

Let's search for ten best comparable sales ("comps") within 1 mile radius of the town, but constraining all three variables - Land, Bldg and Age - to 20% range and time adjusting all incoming sales at 6% annual (.5% per month) growth:

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Five best comps based on closest distance are now chosen from the pool of ten comps:
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Let's take a Spatial look into the comps pool as well as the final five (green ones):

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Now, let's take a look at the Comps Grid to understand how to interpret the final value. While the most Probable Value is the Median Adjusted Sale Price (ASP), the 25th to 75th Percentile Range is the most Probable Value Range for a potential home buyer, although an aggressive investor might consider a lower value range, say up to the 25th Percentile, while a buyer bent on outbidding the competition might consider a more lax value range, say above the 75th Percentile.

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Visit the Homequant site to learn how to value a subject using optimal selection criteria and adjustments, zeroing in on the final five, as well as the value parameters.


Monday, March 14, 2016

Three Sales from Three Prior Quarters - Unadjusted for Time of Sale - are NOT Comps

Three Sales from three prior quarters - unadjusted for the time of sale - are not comparable sales ("comps"). They must be adjusted for the time of sale. 

The following snapshot shows how to time-adjust comps at 6% GROWTH annually (.5% per mo) to arrive at the subject value as of 09-30-2015, resulting in the older comps to gain more in time value than the newer ones...

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Visit the Homequant site to learn how to use time adjusted comps to value subject properties:


Home Buyers MUST Choose Least Adjustment over Distance or Sales Recency

Of the three methods to evaluate comparable sales ("comps") - distance radius, sales recency and least adjustment - least adjustment is the most powerful method. 

Since most comps are pooled from a limited distance within the same neighborhood and older sales are generally time adjusted, distance and sales recency become less powerful methods than least adjustment which, in addition to sales time adjustment, incorporates adjustments for property features as well.

1. Least Adjustment

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Note - while determining least adjustment, signs are ignored. Therefore, +3,000 and -3,000 are tied. In the table above, +2,940 is a smaller number than -8,510, hence being considered the best comp here requiring the least adjustment.

2. Distance Radius

3. Sales Recency

Visit the Homequant site to learn how to use these methods to value subject properties using comp sales (totally free):

Home Buyers MUST Learn to Differentiate between Sales and Comparable Sales

A list of sales - by default - does not become comparable sales ("comps"). Sales - even from the same neighborhood - must be quantitatively adjusted for characteristics and time to become comps. Once adjusted, the differences in property characteristics, distance and time (3/2015 and 3/2016 sales are not the same) become irrelevant. 

So, ask your Broker to show how the comps have been adjusted. Here is a snapshot of the adjustment process:

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Visit the Homequant site and use your comps selection and adjustment to value your own subjects (totally free):

Home Buyers MUST Demand to See the Comparable Sales, Spatially.

Remember: Comparable Sales ("comps") from the other side of a major artery can be significantly pricier, thus improperly inflating the value of your subject property. So, demand to see the comps - contributing to the valuation of the subject property - Spatially!

The same idea is equally applicable for the existing homeowners planning to challenge their property tax assessment. Ask your Tax Assessor to show the comps (that contributed to your assessed value) on the map. 

Since Assessors (of larger jurisdictions) heavily depend on Automated Valuation Models (AVM), this is often a serious problem. If you see the comps on the map, you can relate to them more meaningfully. 

In the graphic below, any comps from south of Hwy-417 might be inappropriate!

Here is a snapshot of spatial comps:

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Visit the Homequant site to value your own subjects with spatial comps. It's totally self-directed (no frozen / modeled values), totally free (no strings) and requires no registration whatsoever...

Saturday, March 5, 2016

Cleveland Housing Market Regains Steam after Consolidation

San Diego Housing Market Trends Up after Short Consolidation

Seattle Housing Market Makes Spectacular Turnaround

Chicago Housing Market Shows Signs of Greenshoots

Boston Housing Market Resumes Upswing after Summer Correction

Tampa Housing Market Trends Up after Consolidation