Paul Chadwick

I have used the Money Shot Photo to draw buyers to my listings over and over. How important is great photography? Like most endeavors you need to do the basics right. It does not get more basic and more important than the photos for any given home.

How many hats does a great Realtor need to wear? The answer is as many as it takes to deliver the level of service you would want for your family. This post is part of the “Better Real Estate Through” series.

The vast majority of consumers use the internet to shop for homes today and you have a very small window of time to capture their attention. I have seen estimates that you have less than a few seconds to grab a buyers interest. I think that in this market with huge inventories that it even more critical to make the short list of properties to be viewed.

This means the home had better look it’s absolute best, in sharp focus, with a blue sky, a pleasing composition and good contrast. I love the creative aspect of being a Realtor, and here is an area, where you can really differentiate yourself from the competition.

Take the time to compose your outside shot it is the first step to engaging a potential customer. Make sure that the sky is blue, gray dreary skies will have a negative impact. I really try to minimize the garage in most front views. Almost every home has a “Money Shot”, here is where some photographic skill can pay off.

I look for the view that will most engage a buyer, the view from the kitchen table of the lake, or the view from the sun room of the forest preserve, the trouble is cameras can expose for the outside view or the inside room, but not both. I set up my tripod and expose the shot for the inside and then retake the shot exposing it for the outside and sew the two photos together in Photoshop.

This technique has produced buyers over and over. Here is an example of the technique on a home I sold in St Charles in 2010.

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Better Real Estate Through Math #1

Better Real Estate Through Math #2

Better Real Estate Through Math #3

My Predictive Value Model relies on many sub components. I have already talked about the CMA and the Median Tax Search, they are extrapolated values from recent closed sales. Today I will add a third historical piece, but before I do, I wanted to let you know that I will shortly discuss searches that involve currently active homes and that also project forward.

Today I want to add the Percentage of Assessed Value Approach. This is a little labor intensive, but adds another estimate of value to further reduce the margin of error.

At this point in your analysis you should be able to establish a reasonable value range for the subject property, let’s say that number is $600,000. The range I would use would be $500,000 to $700,000. Use roughly plus or minus 10% of your subjects predicted value. Grab all the properties that have closed in the same tax district for the past 6 months, and their tax records. You will need the assessed value for each closed property.

If the assessor site you’re using does not provide the assessed value you can use the equalized value, adding back the exemptions and dividing that number by .3333. (This is for Illinois) Note that in Illinois we assess in arrears so make sure you are comparing the correct assessment years. Once you have the assessed value, divide the sales price by the assessed value and you will have the percent of assessed value. Repeat this for all the closed matches and use the median value.

You need to be careful here and make sure that you are aware of anomalies. A new home in Illinois can have a very low value because it has not been fully assessed. A total rehab can also skew your data. You should have a multiplier at this point. (as an example .69). Find the assessed value of your subject (Say $645,000 X .69 = $445,050). In this example the Percentage of Assessed Value would be $445,050.

There are some nuances to this approach, such as splitting the building and land assessments or using a twelve month search, but if you use the twelve month search, I think you should compensate for monthly loss or gain of value. Next time....The Median Active Sale with List to Sale Percentage Applied.

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Better Real Estate Through Math #1

Better Real Estate Through Math #2

In this post I am going to add the Reverse Median Tax Search to the Predictive Value Model. I am fiercely proud of our profession and I am always trying to make sure that I am serving my clients at the highest level I am able to provide. We handle the largest asset in most people’s lives, and I think it’s reasonable to take that responsibility seriously.

The Predictive Value Model is the result of that core principal and my interest in applying math and data analysis to the process. I talked about the traditional CMA as one piece of the model. There are actually seven components to the model.

Today I would like to talk about the Reverse Median Tax Search. The idea here is to find out what similarly assessed properties actually sold for during the past 6 months. First find out the property tax for the subject property. Using that value, create a tax range of plus or minus 5% and do a search of properties that have closed in the past 6 months in the same tax district using tax range as your only filter, and find the median value.

I really like this method. It is giving you a picture of properties that the assessor has valued similarly to your subject regardless of their makeup. There are a few things to take into account when including or excluding properties here. Do not include new properties unless they are fully assessed, here in Illinois we assess in arrears and new construction will skew the sample. If you are including short sales and foreclosures, I would suggest applying compensation. This result will add another component to your value model and help to reduce the margin of error.

I want to relate a story of a home that I used the model to value at 710 Brigham Ct, Geneva IL a couple of months ago. This was a relo property and after submitting my analysis the coordinator called and asked me if I was sure that my value was accurate. Now I am used to being questioned about my values because they are usually lower than what other Realtors have given the home owner, so when he said I was $50,000 higher than the other two Realtors I was shocked and rechecked the model. I felt that I had done the analysis correctly, but I was still pretty nervous. The home sold in 4 days for $360,000 the model predicted $359,123. I know that there is luck involved, having the right buyers show up at the right time and what competition exists, but it really impressed the coordinator. He wanted to know if I would give him the model.

710 Brigham Ct, Geneva IL

Next time...Sold Percentage of Assessed Value.

Please see the other posts in this series.

Better Real Estate Through Math #1

I've spent years trying to create a pricing model that would accurately predict the value of a property. That is no small challenge in this market. Somewhat like trying to hit a ping pong ball in a hurricane. My basic premise was and is to reduce the margin of error by using as many meaningful samples as possible.I have a model now that I call my Predictive Value Model.

The traditional CMA is one component of the model, but to make it a valid sample there are a lot of elements that need to be considered beyond bedrooms, baths, garages, age, lot size, basements, school systems and square footage.

For instance developing a percentage deduction for properties backing to a busy road. This particular analysis was very labor intensive. I needed a large sample and so had to use big subdivisions with lots of similar models. I did the study over multiple years and had to identify the ring properties, those homes that were in the subdivision, but backed to a busy road. As a side note if you Google “Traffic Counts” you can obtain local maps and see traffic counts for specific streets in your area, very useful information for sellers and buyers. Once you identify a ‘Ring” property sale you need to find similar homes in the subdivision that also closed in the same time frame and do a CMA for each property. The goal is to isolate the value difference to the road. Once you have an adequate sample size you will be able to assign a percentage deduction for homes that back to busy roads.

Another adjustment that needs to be made is the compensate for the time between the closed date and the date of the CMA. Homes don’t lose or gain value in one adjustment. The challenge here is to find out what the monthly appreciation or depreciation is. If your market Is losing 6% a year you will need to subtract .5% of the sales price per month to bring it to current value.

If you are including short sales and foreclosures in your CMA adjust for the value differences that those sales include. Foreclosures and short sales have dramatically affected prices in almost every section of the country. Zillow has reported that 20.1% of all homes sold in September 2010 were foreclosures and an additional 27.3% were short sales. A foreclosure, on average, sells for 65% of full value and short sales sell for 85% of full value. Due to the large number of these homes in this market it probably makes sense to include them.

Condition and updating are items that I believe must be taken into account and you need a value system for those issues. One last item to look out for are points paid by the seller which can skew the sales price. Anything you can think of that will make a CMA more accurate you should include in your analysis. This adds value to you as trusted professional and can help your sellers to evaluate their options.

In my next post I will discuss the “Reverse Median Tax Search”

Better Real Estate Through Math #2