Forrest’s Blog

Anyone who has kept up with my monthly Las Vegas Market updates realize that we remain in a maket with seriously over-priced residential resale homes.  Most sellers still do NOT understand that they must be willing to compete with bank-owned REO listing in their own neighborhood as well as comparable homes in subdivisions all over the Greater Las Vegas area.

So take this test on one of you own listings . . . just in its own subdivision.  Create a search on all listings in the subdivision  . . . one story, two story, the whole nine yards.  Then add the listing price per square foot field (LP/SqFt) to your results grid. [You'll find the column manager at the top left of the screen; just click on the 12 dots next to the name of the grid.]  Now sort on the LP/SqFt column in asceding order.  Where is your listing?  Remember only six (6) out of 100 listings are selling each month.  Therefore, if there are 100 listings in the subdivision . . . your’s better be in the top 6 to really be in the selling zone.

Now let’s say that you have a listing that is out of the selling zone . . . and remarkably it receives an offer . . . albeit a low one.  The first “knee jerk” reaction of many sellers will be to reject the offer because they are offended with the offering price.  Why?  Because they are still focused on exaggerated prices from the past.  But perhaps we can offer the seller another perspective on pricing! 

Maybe it is time to educate some of these sellers by looking at their original purchase and sale in a manner similar to what an investor would do . . . but much simpler.  Yes, we are going back to the time value of money and a good financial calculator . . . but much simpler.  I realize that most of us do not really enjoy doing those calculations anyway . . . with all those extra buttons! 

I ran the numbers on an offer that was recently rejected by a seller and the results were astounding.  The seller just rejected an eleven percent (11%) annual return because they were fixated on a price they were never going to get.  But tell me . . . where can anyone realize an 11% annual return on an investment with pretty minimal risk . . . at least compared to the stock market.  We all know that a 4-6% annual return on real estate over a long period of time is good.  This is just one good way to re-focus a seller back into the selling zone.

I’ve put together a very simplistic spreadsheet that will help you will this analysis.  It contains two Investment Calculators [Download this excel file and save on your computer].  The first let’s you put in the original purchase date, purchase price, expected sale date . . . and then calculated an anticipated sale price base on a 6% annual return.  The second one asks for original purchase date, anticipated sale date, original purchase price, and expected sale price.  In turn it calculates the actual annual return as if this property had been an investment.

Try it out!  You may find some of the results very interesting.