Thursday, June 21, 2018

A Structured Research Methodology for First-time Homebuyers

First-time Homebuyer = John Doe

1. Pre-qualification: Since qualified salespeople will not work with John without a recent pre-qualification letter, he must start the process with a pre-qual, which, additionally, allows him to understand the price-level to target.

2. Research Design: With a pre-qual in place, he must not run to a brokerage and get caught into their in-house exclusives; instead, he should educate himself (re: price-level, neighborhoods, type of property, sales vs. comps, brokers, etc.) to a point that lets him call his own shots (i.e. capable of identifying the properties he would like to visit while letting a qualified salesperson arrange the mere showings).

3. Research Step 1: Considering it’s all about ‘Location, Location, Location’ his research begins by identifying the neighborhoods he might be interested in. There are many websites that offer the soft stats broken down by zip codes, census tracts, towns, neighborhoods, etc.

4. Research Step 2: Once he selects a handful of neighborhoods, he needs to zero in on the respective price-levels, in line with the pre-qual. In researching the price-levels, he needs to identify and use sites that are top-down (including top-down subject valuation meaning town to neighborhood to subject; fixed location valuation; and neighborhoods that are under or over assessed) – not MLS or private brokerage sites that are inherently bottom-up (comps based). 

5. Research Step 3: Understanding Comps… John must:
a. Learn to differentiate between Sales and  Comparable Sales, i.e. making quantitative adjustments to comps.

b. Understand Least Adjustment method in selecting comps vs. Distance Radius or Sales Recency

c. Understand Time Adjustment (Three Similar Sales from Three Prior Quarters - Unadjusted for Time of Sale - are not Comps)

d. Demand to See the Comps Spatially, as the comps from the other side of a major artery - despite meeting the distance search - are not necessarily comps (when presented by the salesperson)

e. Insist on Five Best Comps to Value a Subject (when presented by the salesperson)

f. Verify Salesperson’s Listing Price/Appraiser's Value in Four Easy Steps

g. Validate All Values at a Self-directed Site, rather than at the Broker’s Site

6. Research Step 4: John needs to connect with recent homebuyers on social media, to avoid having to reinvent the wheel (will help avoid many trips to the ER, so to say!).

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