Tag Archives: Pricing

Did you hear the woman ate a horse?

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I pondered why the United States was uniquely dependent on employer health care.

I pondered why the United States spends $2.1 Trillion in health care each year.

My research delineates that 34% of health care is paid by private insurance, 47% by Public insurance, and 19% by consumers.

In 2006, healthcare as a percent of GDP was 16% .

These numbers just don’t seem economically correct, but reading through causes, cures, and solutions seems to be like traveling through a maze.

As a patient, if I don’t have a health care plan, providers sometimes double or triple the rate over that of the rate under and insurance plan, so I need to plan to contain the costs, but the costs of the plans are not contained either.  It does not seem like the sensible economic system where costs are shown and consumers choose purchases based on utility.

A look back in history reveals the following:

“In describing how the United States arrived in the predicament it currently finds itself, the author accurately lays the blame on decisions made 60 years ago. Wage and price controls in effect during World War II meant employers had to turn to forms of non-cash compensation to recruit or retain workers. Workers pay taxes on cash wages but not on fringe benefits like health insurance. Over time, it became common for workers to fund their family’s health care by using tax-free insurance policies obtained through employment.” Herrick, D. (2005)

I liken the whole situation to the well known nursery rhyme!
I just hope we restore some sensibility and self responsibility before we get to the “horse”!

If you don’t address the problem directly with wise open direct economic decisions, this is what happens:

There Was An Old Woman

There was an old woman who swallowed a fly,
I don’t know why she swallowed a fly,
Perhaps she’ll die.

There was an old woman who swallowed a spider,
That wriggled and jiggled and tickled inside her,
She swallowed the spider to catch the fly,
I don’t know why she swallowed the fly,
Perhaps she’ll die.

There was an old woman who swallowed a bird,
How absurd! to swallow a bird,
She swallowed the bird to catch the spider,
That wriggled and jiggled and tickled inside her,
She swallowed the spider to catch the fly,
I don’t know why she swallowed the fly,
Perhaps she’ll die.

There was an old woman who swallowed a cat,
Imagine that! to swallow a cat,
She swallowed the cat to catch the bird,
She swallowed the bird to catch the spider,
That wriggled and jiggled and tickled inside her,
She swallowed the spider to catch the fly,
I don’t know why she swallowed the fly,
Perhaps she’ll die.

There was an old woman who swallowed a dog,
What a hog! to swallow a dog,
She swallowed the dog to catch the cat,
She swallowed the cat to catch the bird,
She swallowed the bird to catch the spider,
That wriggled and jiggled and tickled inside her,
She swallowed the spider to catch the fly,
I don’t know why she swallowed the fly,
Perhaps she’ll die.

There was an old woman who swallowed a goat,
Just opened her throat! to swallow a goat,
She swallowed the goat to catch the dog,
She swallowed the dog to catch the cat,
She swallowed the cat to catch the bird,
She swallowed the bird to catch the spider,
That wriggled and jiggled and tickled inside her,
She swallowed the spider to catch the fly,
I don’t know why she swallowed the fly,
Perhaps she’ll die.

There was an old woman who swallowed a cow,
I don’t know how she swallowed a cow!
She swallowed the cow to catch the goat,
She swallowed the goat to catch the dog,
She swallowed the dog to catch the cat,
She swallowed the cat to catch the bird,
She swallowed the bird to catch the spider,
That wriggled and jiggled and tickled inside her,
She swallowed the spider to catch the fly,
I don’t know why she swallowed the fly,
Perhaps she’ll die.

There was an old woman who swallowed a horse,
She’s dead—of course!

sos

 

Finding Nemo? Tell Me What My House is Worth.

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A very simple question, how does the appraiser measure the contribution of an element such as a fireplace?

Is this a subjective process?

Can I have a simple answer??!!

Eureka, we have arrived!  This is what every REALTOR® simply wants to know, the $64,000 question.  The REALTORS® want this to be some easy methodology like: fireplace = $2,000, this one has it, this one doesn’t add $2,000 and done.  Same for granite, same for finished basement, same for hardwoods, same for garage, same for an acre, give me the numbers, plug them in, done!  The gap in understanding between the REALTOR® and the appraiser is the frustrating non-specific specific TRUTH of “IT DEPENDS!

Back up the truck and realize REALTORS® and the public understand that an appraisal is an “… opinion of value” (The Appraisal Institute, 2008) performed by a licensed appraiser.  The misunderstanding starts here in the “…”, and I will go tangential to illustrate and then circle back on topic.

I was involved in a volunteer job help program in the mid 2000’s and the client I was assisting reacted to something I said and he showed me a tattoo on his arm that said, “Money, the root of all Evil.”  Being that I am a huge fan of money as an efficient means of transferring manifested energy and investment, I paused for a moment and commented that I think a few words are missing from the phrase skewing the interpretation and possibly your actions in life.  Depending on the Bible translation you use, I found it to be, “For the love of money is a root of all kinds of evil.” (The Bible, 2017).  I realized that maybe he shortened it for impact and it would otherwise take up too much room, but that is inconsequential to the result. The truth is, when you leave off a few words, or even one, then the whole meaning changes and when the meaning changes, your thoughts change, and when your thoughts change, your actions change and when your actions change, your results change and when your results change, your whole world changes. 

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Returning to real property valuation, the complete definition of an appraisal is, “The act or process of developing an opinion of value” (The Appraisal Institute, 2008).  The “It depends” is due the truth that “It depends”, because the appraiser has to go through the act or process to determine the amount of adjustments, they just can’t count 12 fireplaces in a 3000 GLA area home and make an adjustment of 12 x $2,000 = $24,000 adjustment.  The act or process will determine, by repeatable methods, that the collective actions of the market may only value fireplaces in 3000 GLA homes up to 2 fireplaces and after that, additional ones may even detract from value.  This is where the Sales Comparison Approach is valuable over the Cost Approach. 

By shortening the definition of an appraisal to “an opinion of value”, market participants believe that the appraiser is using a subjective process based on feeling, rather than an objective process based on a processing of data and facts.  Many people and REALTORS® use the subjective processing and thereby make mistakes in market valuation estimates. If the REALTOR® uses the accumulation of intuitive knowledge/data collected from 100’s of transactions, then they become a human computer that is going through a complimentary act or process to the appraisers’ work, as long as it is not subjective or based on inaccurately on feeling.  This is a noteworthy time for a repeat of my earlier post that “REALTORS® are Market Makers and Appraisers are the Referees!” (Straley, 2017).

As for the technical appraisal answer to this simple question, the appraiser will utilize the act or process called “paired set analysis” to find homes that are exactly the same except that one has a fireplace and one doesn’t.  This objective process, based on facts and data, will enable the appraiser to distinguish the appropriate adjustment for the property characteristic.  If a paired set is lacking in sales history of the market, the appraiser can also use a sampling process of closely related/similar sales data using a set with fireplaces and a set without fireplaces and averaging the two sets and finding the difference in the averages.  The larger the sampling and the larger the differences wash out (Martin, 2013).  The smaller the characteristic difference, the harder it is to identify the market value of that characteristic.  I find it much easier to explain on larger elements like a 2 car garage vs. a 3 car garage because the collective market valuation is much more evident.  

bigstock_121114772The cold hard truth is that Nemo is not easy to find and there is no fast track to some quick opinion of value. Finding the objective facts is much more difficult than it looks and agreed, it would be much easier, but less accurate, to just have a subjective opinion. To support that view, simply watch the vetting from a Dragnet scene and you will agree, “Just the Facts, Ma’am” is the best method (Dragnet, 1970’s).  Sure, you can log into 400 websites to “Find What My Home is Worth” and come up with 400 different values and average them all, but you are much better off if you hire an experienced Appraiser and a well educated REALTOR® to help make sense of this complicated process. 

In the REALTOR® category, I suggest you look for a candidate with a degree from REALTOR® University and a certification from the National Association of REALTORS® Pricing Strategy Advisor (PSA) course (National Association of REALTORS® PSA, 2017), there is your Nemo! 

Michael Straley | Go Straley Group of eXp Realty | Stafford, VA. | Lic. in VA | 540-834-6263

psa-instructors

References:

The Appraisal Institute, (2008).  The Appraisal of Real Estate (Thirteenth Edition). 

The Bible, (2017). 1 Timothy 6:10. Retrieved from https://www.biblegateway.com/quicksearch/?quicksearch=root+of+all+evil&qs_version=NIV

Dragnet, 1970’s. Retrieved from https://www.youtube.com/watch?v=zlGWzAaR03Q

Dragnet, 1970’s. Retrieved from https://www.youtube.com/watch?v=AMIZGrgWOO4

Martin, S. P. (2013) Advanced residential applications and case studies (2nd Ed). Laguna Hills, CA: Ashley Crown Systems, Inc.

National Association of REALTORS®, (2017). Pricing Strategy Advisor Certification (PSA). Retrieved fromhttp://pricingstrategyadvisor.org/about/

NEGOTIATION NUDGE – 10 MONEY TIPS TO GET THE DEAL DONE!

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TEN WAYS TO WIN THE NEGOTIATIONS!

Negotiations are about inquiring about the individual parties – what are their needs? What is the value of the property? What is the feeling? Are both parties equally paired in negotiation techniques and feelings?

1. The monthly difference of $3000 per month is about 15 dollars at 4.5% over years – does your buyer qualify for this? Is it worth a couple of Starbucks a month to own this house? If not, move on????  CLICK HERE TO AMORTIZE

What is the additional down payment? $0 or $300 or $600 – does the buyer have this?

2. The buyer may have requested some items from the seller that may be removed or purchased by others – such as home warranty? Home warranty can be purchased by other parties or perhaps after closing (30 days I think, please confirm.)

3. Is there another type of financing that may save buyer monies? If he is a hometown hero, you might wish to contribute 20% and Parkmont would contribute $750. Fathom Partners to SAVE MONEY FOR HEROES!

4. Do you have a thoughtful and specific estimate of closing costs. Ask your lender and title company to crunch the numbers – the difference in a negotiation may be won or lost based on the difference of a ballpark estimate and specific estimate.

5. Does the seller have a Title Policy – does the title policy qualify for a 20% discount to the buyer at the title company purchase of title insurance. Depending on type of policy, when it was purchased, and who is issuing new policy sometimes there may be a credit or reduction in cost to the buyer title insurance.

Are we really present?  Are we using time well? or are we just a shadow of our real selves?
Are we really present? Are we using time well?
or are we just a shadow of our real selves?

6. Take the $3,000 off our commission if you feel the benefits out weigh the consequences.

7. Discuss this with your client – strategize negotiations with your client – 1500/1500 750/750/750/750 –   Who can participate??

8. Looking forward, you need to have an understanding of your clients home inspection expectations, as negotiations continue throughout the process. Do buyer and seller have like minds on upcoming issues. Do you expect appraisal difficulties? You need to inquire, if your buyer still wants much more or if seller has no room to budge further – setting expectations forward may be a part of the discussion now with your client and the coop agent.

9. Does the seller have the money available? Perhaps the seller is bringing money to the table – and has no more? Perhaps the seller has plenty of money on the table and just “feels” he wants more. Confirm this is not a potential short sale.

10. Bottomline, what is the property worth? Is the buyer getting a deal, a fair price, or over paying – this is always the starting point. What is fair market value?? Learn more about the GOLDILOCKS THEORY

Always follow your ethics with Cooperating Agent When Negotiating…

Standard of Practice 16-16
REALTORS®, acting as subagents or buyer/tenant representatives or brokers, shall not use the terms of an offer to purchase/lease to attempt to modify the listing broker’s offer of compensation to subagents or buyer/tenant representatives or brokers nor make the submission of an executed offer to purchase/lease contingent on the listing broker’s agreement to modify the offer of compensation. (Amended 1/04)