Some Difference Matter, Some Don't Move the Needle
What Is It Really Worth?
The Question Every Agent Asks When Looking At Home Inclusions, Finishes and Layouts
When it comes to the features of a home whether that be the total number of bathrooms, bedrooms or whether it's a multi-level versus ranch build, every detail could mean a lot in your area or very little. The question quickly becomes how does an agent decifer what matters and to what degree.
Before we dive into the solution however we want to make one thing crystal clear. Do not assume any detail is universally valued the same or important. Always look at each home and area as a new problem set to solve. We have seen some areas where a finished basement with an extra bedroom and bath meant a $40k jump, and others where a finished basement meant $0. There have been neighborhoods where the value didn't change between two story and ranch, and others where ranch homes sold at a premium. So how does an agent discover what is making an impact in the area they are pricing?
- Find the Trend: Using sold data find the trend of what homes are worth in your subject properties area.
- See Which Details Move the Needle: Compare properties and note what differences you can see are consistently moving the value up or down.
- Find One You Can Match: Choose a property that best matches your subject home and see if you can match it closely for the value moving details to help guide your pricing above or below the trend.
Let's look at a few examples of this process to walk through how one would go about finding how to account for different features in different areas.
Can You Spot the Difference?
With the Right Tools It's Easier Than You Think
As we jump into these examples one thing to note now is that I'm using graphs created using the Focus 1st Visual Home Values software. You'll see how easy it is to spot trends and get the answer to the questions regarding how much to adjust for differences using them, this is why the software exists.
One of the key differences we'll see in many properties is additional bathrooms or bedrooms. Now most agents are taught to assign a value number per bathroom and just add or subtract to find their new price. This can work by pure luck, but looking at a graph gives us a much clearer way of seeing the effect or the non-effect.
Example: How much does an additional bedroom and bathroom affect the value?
We can in this example the two homes above the trend have 4 Bed / 4 Bath while the two below the trend had 3 Bed / 3 Bath. This means that the extra bedroom and bathroom have a positive effect, while the lack of them has a value drop.
NOTE: If our subject property had was a 3 Bed / 4 Bath or a 4 Bed / 3 Bath potentially we could make an argument for splitting the difference and being on trend.
While this seems obvious and like common sense let's look at another area and ask the same question, is another bedroom and bathroom moving the needle?
We can see here that the extra bedroom isn't moving the needle or causing the value jump! Pricing a home at 3500 square feet we can see that homes with both 4 and 5 bedrooms are selling right around the line just below and above. There is the a value jump on the 3003 Stonehaven Dr home but it's not the bedroom doing it. So we'd have to look closer to see what it was that added the value in this area.
This same process can be applied to looking at other features like garage spaces. Let's look at an example to see what kind of effect garage space can have.
Example: How much does an additional garage space affect the value?
In this example we can see that there is a range of bedrooms and bathrooms that aren't really making a difference when it comes to pricing a home. (Again I mean that it's not moving it way off the trend pattern, not there is no difference when it comes to size of home.)
As we look at 6427 Garrison Court which is well above the trend we can see it's the only one with a 3 Car Garage, which is moving the needle for that home in a big way.
All At Once, Rather Than One At a Time
Now for these examples we've been looking at individual details, but in most cases you'll examine a graph and ask the question of why is a property way above or below the line and then if there are any common features we can find and match our home to, not just for one feature but for all of them at once. Let's see how a more detailed and complicated graph would allow us to do this quickly.
Example: Pricing a home at 3,300 Square Feet with a lot of recent sales that tell us a lot about the area.
So the first properties we look at are those that are way above or below the line and ask; What's different?
6951 Meade St is well above the trend, and looking closely we can see it's the only home with a finished square footage close to the total square footage. The finished basement in this case is moving it well above the line.
6987 Loudon St is well below the trend, and looking closely we can see it's the only home with a 2 car garage versus 3 car. That lack of a 3rd car inclusion is causing a major value drop.
4302 Carlyle Ln is a little above the trend, and looking closely we can see it has an additional bathroom compared to the other homes not 6951 Meade St. So an extra bathroom is a needle mover, just not as big as garage space or finished square footage.
Now that we've identified those needle movers we'd ask if our subject property matches any of these major movers. If not then we'll look at the other home sales and see if we can find finishes, location or inclusions that match one or more of them to show us what the market is telling us the value for the home.
What If You're the Unicorn?
Sometimes You Stand Out, Sometimes It's Only Value to You
There are times that what your sellers thinks is the golden goose additional feature that should add significant value to the home turns out to be more sentimental than economic. This is a hard thing to explain to people who love their home and their 'improvements' but looking at a graph we can see if it matters or not. That ability really helps you explain the market in a way that you don't ruffle feathers, and back it up with real information.
Always Look at the Trend!
Pricing is a complex balance of finding what homes have sold for and trying to establish how those properties can inform us on what the market says our subject is worth. If you follow the process shown above you'll be on a great track though!
- Find the Trend: Using sold data find the trend of what homes are worth in your subject properties area.
- See Which Details Move the Needle: Compare properties and note what differences you can see are consistently moving the value up or down.
- Find One You Can Match: Choose a property that best matches your subject home and see if you can match it closely for the value moving details to help guide your pricing above or below the trend.
***One last note: This is only the pricing step of building a Competitive Market Analysis, using this value we would find our competition and then move our pricing up or down based on the momentum and opportunity in our buyer zone to find the true market value.
Learn more about the buyer zone and the competitive market analysis process in The New CMA: Competitive not Comparative available on Amazon or for FREE eBook Download.
What is Focus 1st?
Check out their website to learn how the Visual Home Values Software,
and the integrated AI tool can help you today!
In this blog you've seen examples of graphs and reports from the Visual Home Values Software made by Focus 1st. If you've never heard of it, it's specifically built for agents to use their MLS searches to create pricing and reviews reports that answer key questions and help agents better than any other CMA software. It was created by a former HP engineer almost 20 years ago and has been changing the industry's understanding of how to competitively price listings.
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