We all learned how to evaluate a property in \u2018Real Estate School\u2019 using the Price Adjustment Approach. It works great in the textbooks. <\/p>\n\n\n\n
Not so much in the real world.<\/p>\n\n\n\n
Over time, I developed my own evaluation system that makes waaaaay more logical sense to both myself and my clients, The Big Picture CMA.<\/p>\n\n\n\n
This system takes up an entire module in the Master\u2019s Program, but the information is actually spread across three <\/em>modules: Setting the Stage, the Big Picture CMA, and Pricing Psychology.<\/p>\n\n\n\n It\u2019s not complicated. It\u2019s just not possible to fully comprehend it within the confines of a tiny blog post. You know what they say about a little bit of knowledge being dangerous.<\/p>\n\n\n\n However, I will explain why I believe that the price adjustment approach is not <\/em>particularly useful in the real world.<\/p>\n\n\n\n Pricing is an Art and a Science<\/strong><\/p>\n\n\n\n There\u2019s no way that anyone <\/em>can accurately predict the future sale price of a property. There are way too many moving parts at play, including that it\u2019s impossible to know when and where the perfect buyer might appear.<\/p>\n\n\n\n We play the averages, and those of us who are skilled and experienced can get closer to the price than those of us who are unskilled and inexperienced. <\/p>\n\n\n\n But it\u2019s still an educated guess, at best. <\/p>\n\n\n\n It\u2019s not reality that you can dump all the data into a giant spreadsheet and out pops the exact sale price. Engineers and accountants hate this fact! But you\u2019re doing them a disservice to suggest anything otherwise.<\/p>\n\n\n\n That\u2019s why I dislike the price adjustment approach to valuation. It\u2019s too exact.<\/p>\n\n\n\n The Blank Stare<\/strong><\/p>\n\n\n\n Other agents used to pop their head into my office all the time and ask me pricing questions.<\/p>\n\n\n\n \u201cHey, Ted. Most of the houses in this neighborhood have double-car garages, but this one has a triple. How much should I adjust for that?\u201d<\/em><\/p>\n\n\n\n I\u2019d stare at them with a blank face and say nothing while thinking, \u201cHow the hell should I know?\u201d <\/p>\n\n\n\n To me, this was like giving me one piece of a jigsaw puzzle and asking how I liked the complete picture.<\/p>\n\n\n\n To provide a reasonable answer, I\u2019d ask approximately 1,000 questions about the property, the neighborhood, the comparables, the target buyer, etc. Then I\u2019d give a general overview of how important I thought the triple-car garage might be considering all the other factors. I never provide an exact number, which is what they wanted.<\/p>\n\n\n\n Those agents never poked their head in my office ever again. I guess my system sounded complicated (?).<\/p>\n\n\n\n It\u2019s not, actually. But it\u2019s like not understanding a sport until you know all the rules; then it makes perfect sense.<\/p>\n\n\n\n Once you understand The Big Picture CMA\u2019s core logic that I teach in the Master\u2019s Program, it\u2019s actually a much more sensible way to look at things. From your perspective and <\/em>your clients\u2019.<\/p>\n\n\n\n Why Argue About It?<\/strong><\/p>\n\n\n\n One of the problems I have in using the price adjustment approach is that you open yourself up to an argument with your clients over every single line item.<\/p>\n\n\n\n I think the triple-car garage is worth this much.<\/p>\n\n\n\n \u201cAre you serious? It\u2019s worth way more than that!\u201d <\/em> <\/p>\n\n\n\n Argue all you want. Right or wrong, you\u2019ve already lost credibility with this client, and they\u2019re probably not going to hire you.<\/p>\n\n\n\n This doesn\u2019t mean that I don\u2019t talk about the pros and cons of every comparable and every major feature. I do! <\/p>\n\n\n\n Just like a recipe, I show them all the ingredients, mix them together, and skillfully guide them towards the most logical starting list price.<\/p>\n\n\n\n And, <\/em>I prepare them ahead of time to adjust quickly, in case the recipe doesn\u2019t turn out as well as we hoped.<\/p>\n\n\n\n It\u2019s all about using the right ingredients.<\/p>\n\n\n\n Learning The Big Picture CMA is one way to create a raving fan base and build a business that thrives on a never-ending stream of incoming referrals. This is the foundational doctrine of the Agent Skills Master\u2019s Program.<\/p>\n\n\n\n This article was inspired by module #10 – The Big Picture CMA – part of the Agent Skills Master\u2019s Program<\/a>. <\/p>\n\n\n\n In \u2018The Big Picture CMA,\u2019 I explain step-by-step how to use the Criteria Manipulation Approach (CMA) to quickly determine the correct price for any property, efficiently and with full agreement from your sellers.<\/p>\n\n\n\n
\n\n\n\n