Negotiating the sale of residential real estate is no more difficult that negotiating for any other product of service that does not have a fixed price; however, due to the colossal cost of houses, the process is more important financially than negotiating for other big-ticket items like automobiles. A mistake made while buying or selling a house could cost as much as a new car; sometimes such mistakes could pay for many cars. Skilled negotiators can obtain favorable pricing and terms without the assistance of a broker, but the novice who is inexperienced at this process often will not. Novice negotiators can benefit from using a professional real estate agent.

Perceptions and Motivations of the Negotiators

When two parties enter into a negotiation, they hope to reach agreement and close the deal because negotiations without a deal are a complete waste of time for all parties involved. The one goal both parties have in common is that they both want to close a deal.

Understanding what makes deals happen requires an understanding of the perceptions of the parties, and the motivations for action these perceptions create. Each party entering into a negotiation has (1) perceptions of the value of the property, (2) a belief about the direction of market pricing and (3) a sense of the motivation of the other party in the negotiation. Depending on what buyers and sellers believe about these three issues, they will adjust their bids and asking prices to try to make a deal happen. The greater the degree of alignment between the perceptions and beliefs of the two parties, the more likely a transaction is to occur.

Perception is reality for each individual, but that does not mean that each party to the negotiation shares the same reality or that either parties perceptions match objective Reality. This was nowhere more apparent than with the perceptions of value both buyers and sellers had during the Great Housing Bubble. The parties to transactions during that rally were aligned with their perception of value and both parties where totally incorrect. When prices started to fall, the perception of buyers changed before the perception of sellers did. When these parties began living in alternate realities, deals could not be reached, and transaction volume declined dramatically.

Comparable Sales and the Perception of Value

Sellers almost universally believe the value of their homes is greater than its actual fair-market value. Buyers generally have to be convinced that home values are greater than what they are willing to offer. Once the parties begin to negotiate, the seller usually must lower their asking price and a buyer must raise their bids for a transaction to take place. The actual fair-market value for any property is the price the parties to the transaction agree upon.

Listing brokers will often pander to the fantasies of sellers to obtain the listing. The broker knows the property has little or no chance of selling at a ridiculous asking price, but they take the listing to provide the seller with a wait-and-see opportunity to prove that the asking price is too high. After some period of time, the broker will go back to the seller and prompt them for a price reduction to meet the market.

Buyers will generally offer less than they believe a property to be worth to give themselves room to increase their bids without overpaying. Savvy buyers will establish a maximum bid before they enter the negotiation. If they can get the property for less, they consider it a bonus, if they bid up to their maximum offer without getting the property, they stop bidding and move on to their next-best alternative.

Buyers and sellers do not perform this negotiation in a vacuum. The final sales price the parties agree upon will generally be close to the sales prices of similar properties in the market area. These similar properties are what is known as comparable sales, or “comps” for short. Comps serve as the basis for negotiation for two main reasons: (1) financing is limited based on comparable sales, and (2) if buyers bid too little, or if sellers ask too much, each party has better alternatives to closing the deal; sellers can wait for a better offer, and buyers can find a similar property with a more reasonable seller. Each party to the transaction must be aware of their best alternative to a negotiated agreement because they may need to pursue other prospects.

The Problem of Cherry Picking

Picking comparable sales to establish a basis of comparison is as much art as science. Each party could select comparables they believe best serves their perception of value by “cherry picking” either the highest or the lowest sales to exaggerate the base value. If one party can convince the other that the basis for negotiation is 5% higher or lower than what it really is, then the successful cherry picker will make 5% more on the deal. The incentive to cherry pick is strong.

One approach to solving the cherry picking problem is to obtain an appraisal from a neutral third party; however, appraisals are not free, and the buyer is generally the one responsible for paying for it. Appraisals are rarely ordered during the initial stages of a negotiation, so they seldom work to overcome cherry picking.

Another approach is to obtain a Broker’s Opinion of Value to establish a base value. Unfortunately, brokers being agents of either the buyer or the seller are not neutral third parties. Brokers have a strong incentive to cherry pick to serve their clients.

Broker Duplicity and Failed Transactions

Brokers are primarily motivated to make a transaction occur because they generally do not get paid otherwise. Secondarily, they are motivated to obtain the best possible price for the party they represent; they have a fiduciary duty to serve one party to the transaction (although they can serve both in a dual agency situation). Many sales agents believe deceiving the other party in a negotiation is an appropriate tactic justified by their fiduciary duty. Realtor duplicity contributes to the impression in the general public that real estate agents cannot be trusted. Many cannot be.

The reason for the manipulation and deceit among unethical Realtors is that the techniques they use alter the perceptions and motivations of the other party in a negotiation. When these techniques are successful, buyers raise their bids or sellers reduce their asking prices. When these techniques fail—which often occurs—the use of these techniques so offends the other party that a deal that might have otherwise occurred does not go through; that result serves neither party, and it can be argued it is a violation of an agent’s fiduciary duty.

Honest Brokerage Establishes a Value Range

The best solution to the problem of establishing a base value for negotiation is for the broker to provide an honest and neutral opinion of value similar to an appraisal. If a broker prepares the opinion of value in such a way that it could serve the buyer or the seller, both parties to the negotiation can agree on a range of pricing within which the negotiation can take place.

For example, if a particular property has a range of comparable values from $450,000 to $550,000 with an average of $500,000, this information can be presented to both parties. Both can agree that the current comparable value is somewhere in this range as each one could make arguments for one extreme of the other.

The range of comparable sales values does not necessarily dictate a range for negotiating the deal—the initial bid and asking price do that—but it does serve to anchor the negotiations to a range of values that reflect the realities of the current market.

Trend of the Market

Sales prices for properties change over time. In most real estate markets, these prices go up with increases in wages among those who live in the market area. In California, we are prone to bouts with irrational exuberance and price volatility. Instead of slowly climbing prices like stable markets in the Midwest, Californians must cope with markets that can quickly move both up and down. The current trend of the market—if widely understood and accepted—distorts the perception of value and motivates buyers and sellers to stay ahead of the trend. In a rising market buyers are motivated to raise their bids and sellers are motivated to ask over comparable sales values. In declining markets, sellers (who accept reality) are motivated to lower their asking prices and buyers offer bids lower than recent comparable sales.

Motivation of the Other Party

Professional poker players spend hours studying people’s reactions to try to elucidate the cards their opponents are holding. In poker if players can determine what their opponents believe about the strength of their hands, they gain a significant advantage over the other players. If you know the motivations of the other party in a negotiation, you can respond by concealing your own motivation in hopes that the other party will either raise or lower their pricing to come to you. This is not deceitful; it is sound negotiating practice.

The risk of divining the other party’s motivations is that the perception could be incorrect and this may result in failing to complete a deal that otherwise might have gone forward. If parties to a negotiation are strongly motivated but pretend not to be, failure to complete a deal can be very frustrating. For anyone who has ever fallen in love with a property, not raising their bid to close the deal and then losing the property can be very disheartening. For any seller who desperately wants to get out of a property but fails to lower their price to meet the market, watching a buyer walk away is disappointing.

To try to gain advantage in this part of the negotiation, people often ask why the other party wants to buy or sell. Listing agents will almost universally tell buyers some story that makes the seller look less motivated than they really are. Buyer’s agents will tell the seller that the buyer is interested, but not too interested or “in love” with the property. Each side looks to gain advantage over the other by disguising their motivation. Sometimes this practice kills the deal, but sometimes it results in a significant monetary benefit to one party.

Comparable sales and the Negotiating Range

Comparable sales represent an anchor point in the negotiation, and the trend of the market tends to push future transactions in the direction of the current market trend. Understanding this dynamic provides a framework for buyers to present their bids and sellers to quote asking prices. Once an asking price is in the market and an offer is made on a property, the two prices establish a negotiating range. If the seller and buyer move to a common point within this negotiating range, a transaction will take place. If the buyer fails to raise their bid, or if the seller fails to lower their asking price, and the two parties do not find common ground, a deal will not take place.

The final sales price will generally be within a tight range around the price of recent comparable sales, regardless of what fundamental values may be. It is extremely rare for a property to sell for more than 15% below comparable sales prices. There is usually enough buyer competition that sellers will simply hold out for a better offer. It is also rare for a property to sell for more than 15% above comparable sales prices because lenders will not finance the additional sums. To overpay for real estate, buyers must close the deal with their own money. Most buyers either cannot do this, or they chose not to and go bid on other properties. Few properties sell for prices on the extremes, and most sell for near comparable sales prices. In bull markets, these sales are above recent comps, and in bear markets they are below.

Understanding the range of potential transactions is important because it goes to the core of two behaviors that waste time and effort for everyone involved: lowball bidding and ridiculous asking prices. There are many buyers out there looking for a real bargain. Bidding 30% under comparable sales is not going to result in a transaction. Some do this to try to establish a negotiating range and split the difference hoping to get the property for 15% under comparable sales. It does not work. During the deflation of the housing bubble, many bid 30% under comparable sales because they speculated that prices were going to drop 30% from current comparable values. Correct as this assessment was, it did not mean that sellers were going to sell for those values. If a buyer believes prices will fall more than 15% from current comparable sales, they are better off not bidding on properties and waiting for prices to drop.

On the other extreme is the seller asking for a ridiculous price more than 30% over comparable sales. A property priced that high will sit on the market forever and be an embarrassment for the seller and the listing agent. If the seller believes the market is going up and that they may obtain this price in the future, they are better off waiting for that future to come because a property will not sell for 30% over comps in any market.

Seller Urgency and Response

Why do sellers lower their price? The most obvious reason is that they know if they do not, they will not sell their property, but a more nuanced explanation is required to really understand what is going on. Once a seller has established an asking price, greed motivates them to keep it as high as possible. Once a buyer has made an offer, fear motivates a seller to lower the price to close the deal. The battle between greed and fear is the essence of a seller’s struggle.

If the seller perceives their asking price to be “fair” they are not strongly motivated to lower it because they believe any buyer who will not agree to their asking price will be replaced with a buyer who will. This is particularly true in a rising market. To the seller with a “fair” price, it is only a matter of time before a buyer shows up willing to pay their price. It doesn’t matter if the price is fair; it only matters if the seller believes it is. If the price is not fair and the seller is delusional, no buyer will show up to pay how much the seller wants, and no transaction will take place. Denial and delusion distort perception and prevent sellers from doing what is necessary to sell their property.

If the seller perceives their asking price to be fair, but they also recognize the trend of the market is down, they will be much more motivated to lower their price quickly to find a buyer. This is a rational fear because the longer they wait to find a buyer, the more money they lose to declining prices. Of course, this presupposes that sellers recognize the market downtrend and do not believe the market is currently at the bottom.

Buyer Urgency and Response

Why do buyers raise their bids? Again, the most obvious reason is that they know if they do not, they will not get the property because they will either be outbid, or the seller will not lower the asking price to meet their bid. There are a number of motivations buyers have for increasing their bids, and these motivations emanate from their perceptions of (1) scarcity, (2) market trend, (3) bidding competition, (4) property value, and (5) property desirability. Manipulative real estate agents use techniques to generate fear in buyers and alter the buyer’s perceptions and motivate them to increase their bids.

If buyers perceive another property will be available if the current deal falls through, they feel no sense of urgency to raise their bid to close the deal. In order to provide that motivation—through perfidy—Realtors taunt buyers with the idea that they should “buy now or be priced out forever.” If buyers believe this fallacious nonsense Realtors peddle, they will believe properties are scarce, another deal will not come along, and they should raise their bids to close the deal. It doesn’t matter whether or not this perception is reality, if buyers believe properties are scarce, they will be more motivated to raise their bids and close the transaction.

If buyers perceive the market trend is moving higher, they may believe they will be priced out, but they may also have the more rational belief that if they do not bid higher, someone else may out bid them. If the bidders they are competing with are strongly motivated—for whatever reason—a higher bid may be the only way to secure the property. In the grander scheme, it may be in a buyer’s interest not to buy under these circumstances because such market conditions are indicative of a real estate bubble.

If buyers perceive the market trend is down, they know they can either get a better deal on the property they are bidding on or they will get a better deal on another property if the current negotiation fails. This is perhaps the most difficult problem for a realtor to overcome. When it really is in a buyer’s best interest to wait or make cautiously low offers, the motivation to increase bids is practically non-existent. The answer to this problem for Realtors is to publicly call the market bottom every few months even when they know it is not going to happen. Bidders must be convinced that prices are going to rise again soon or there is limited motivation to bid on properties and even less urgency to raise bids.

If buyers perceive they are the only one interested in a property, they are far less motivated to increase their bids because there is no competition, and the negotiation is purely between the bidder and the seller. Realtors have a tactic for this problem; they lie and tell bidders that there are other offers on the property. This is perhaps the most commonly told lie in the real estate industry. If buyers believe it, it renews the sense of urgency for buyers to increase their bids.

If buyers perceive their bid is “fair” relative to the value of the property, they are not motivated to increase their bid. Nobody wants to overpay for real estate. This is where cherry picking comps and arguments about the investment value of real estate are used to convince a bidder that their perception of value is too low and that their bid is not “fair.” The National Association of Realtors spends huge amounts of money to tout the financial benefits of home ownership to convince people homes are more valuable than they really are.

If buyers perceive that a property is uniquely suited to their needs, if they “fall in love” with the property, they are highly motivated to increase their bids to obtain the property. This is the ultimate fantasy of every seller. Once a buyer is in love with a property, they will raise their bids until they either have the property or they reach the limit of their resources. The obvious advice to buyers is not to fall in love with any property you want to get for a “fair” price. For most buyers, this is easier said than done. Many buyers will not even bid on a property unless they are “in love” with it. This behavior almost guarantees overpaying for a house.

The Dynamics of a Transaction

Once a property is offered for sale, and once a bidder presents an offer in a realistic range to complete a transaction, the negotiation for real estate begins. The prospective buyer and the seller generally communicate through intermediary agents through informal messages and formal written offers and counteroffers. The informal messages take two main forms: (1) attempts to solicit information on the motivation of the other party, and (2) attempts to increase the motivation of the other party to either raise their bid or lower their asking price. The informal communications are an integral part of the art of the deal. The formal communications through offers and counteroffers are presented in the context of the narrative provided through the informal communication.

It is the exchange of information through the informal lines of communication that often determines if a transaction will occur. If both parties are not motivated, and the spread between the bid and the ask is wide, no sale will occur. In these circumstances, the motivations of the parties must be increased to meet somewhere in the middle. That is the purpose of the informal communication. If both parties are motivated, then a deal is likely to occur. The price point where they meet is determined by the skill of the negotiators. In these circumstances, concealing motivation results in a transaction with a favorable financial result for the concealing party. It is like the poker player who learns to hide their emotions in order to prevent the other party from reading the strength of their cards.

In reality, the only meaningful communication between the bidders and sellers is the written offers and counteroffers because it is the only actionable communication. Most people do not realize that asking prices are meaningless. A seller is under no obligation to sell a house if a buyer agrees to pay an asking price. In contrast, a written offer is actionable. If a seller agrees to a written offer, a valid contract is formed, and the buyer is obligated to buy the property (subject to contingencies). Once written offers and counteroffers begin going back and forth, acceptance of the written offer by the other party forms a contract, and the deal moves into the escrow process.

Summary

The process of negotiation is a study in human psychology. It can be readily understood, and the process can be mastered. It requires emotional control and an evaluation of reasonable alternatives to completing the deal. The parties to the transaction establish a range of valuations and then negotiate a price somewhere within this range depending on the relative motivations of each party. If the parties are motivated enough, a transaction takes place; if they are not motivated enough, no sale occurs. Seeing the process as one of perception and motivation provides a deeper understanding of dynamics of the process, and it may provide the edge needed to gain financial advantage. To quote Sun Tzu from the Art of War: “If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”

Thank you again for allowing us the opportunity to present ourselves to you in this manner. We look forward to working with you.

Sincerely,

Larry Roberts

When you are ready to buy or sell a home, we are here to serve you.

IHB Property Valuation Reports

Over the first few years of writing for the IHB, I outlined a number of property valuation principals based on the property’s rental cashflow. Pulling together all the financial information about a property into a single report allows buyers to make informed purchases and allows sellers to establish a pricing strategy that will allow them to sell for the best possible price.

The IHB Property Valuation Report is six pages of calculations and notes. It sounds intimidating at first, but once you go through the information it contains, you will not want to buy or sell real estate without this report.

Cover Sheet

The report cover sheet contains summary information; it has some pictures, the address, and a few defining characteristics to identify the property. The first piece of summary data is the asking price, and this is followed by the Comparable Value, the Likely Transaction Price, and the IHB Fundamental Value.

When we prepare a Brokers Opinion of Value, we include what we believe to be the most Likely Transaction Price based on recent comparable sales and the trend of the market. This is our best guess at what the final sales price of this property will be.

The IHB Fundamental Value is based on the rental comps with some subjective adjustment based on a property’s desirability. Since market information is always changing, the report is time sensitive, and it is dated for reference.

IHB Owner-Occupant Brokers Opinion of Value.pdf

Cost of Ownership and Acquisition

The second page of the report is full of of data and calculations. It looks daunting at first, but it is arranged to provide six (6) data points critical to understanding a property purchase:

1. Monthly Payment
2. Monthly Cash Outlays
3. Monthly Cost of Ownership
4. Monthly Ownership Gain (loss)
5. Total Cash Costs
6. Total Savings Needed

The first three items on the list look superficially similar, but they all provide slightly different information. The monthly payment is the check you will write each month to your lender; pretty basic. We assume conventional 30-year mortgages in our calculations because it is the stable financing of long-term homeowners.

The monthly cash outlays is the total amount of all checks a homeowner will need to write each month to be current on payments, including property taxes, insurance, HOA fees and other expenses. This amount is often much larger than most people realize. Some will try to reduce their monthly cash outlays by deferring property taxes to a lump sum payment every six months, but the expense is still there, and this total can eat up a significant portion of someone’s take-home pay. I recommend using an impound account to pay property taxes to avoid the last-minute scramble.

The monthly cost of ownership is a more accurate accounting of the true cost of owning property. There are many items which add to or subtract from the actual cost of ownership such as (1) income tax savings, (2) equity hidden in the payment, (3) lost income on the downpayment money, and (4) maintenance and replacement reserves.

Once the full cost of ownership is properly calculated, this figure can be compared to the cost of a comparable rental. Any cost savings or ownership premium is reflected here. As mentioned previously, blue chip properties often carry an ownership premium whereas undesirable properties generally demonstrate significant positive cashflow.

The final area of concern is having the cash available to close the deal. The downpayment is an easy expense to identify, but it is not the only cash a buyer will need to obtain the property. Buyers have to budget moving and furnishing expenses, closing costs and interest points (if any) to accurately assess their cash needs. Also, it is not a good idea to spend all your cash on a house and leave no emergency reserves. The spreadsheet estimates 6 months net salary based on the financing qualifications for the loan amount. The total cash costs plus emergency reserves equal the total amount of liquid savings needed to close the transaction.

Estimates of Value

The third page looks at values and sets the stage for negotiation. It is composed of three sections:

1. Comparative Sales Value and Negotiating Range
2. Cashflow Value and IHB Fundamental Value
3. Asking Price and Value Ranges (chart)

In Negotiating for Real Estate, I outlined the negotiation process and described how the top and bottom of the negotiation range is established. The Comp Range is a measure of the highest and lowest prices of recent comparable sales. The Comparable Sales Value is a blend of the mean and the median of comps used to establish value. By blending the two values, it recognizes outliers without putting too much emphasis on them.

In a stable market, properties may trade at a premium or discount to rental parity based on their desirability as owner-occupied housing. The most desirable “blue chip” properties trade at a 10% premium to rental parity, and transitory rental properties trade as low as 25% below rental parity. When the IHB prepares a Brokers Opinion of Value, we subjectively rate the property based on its owner-occupant desirability, and we adjust the cashflow value of based on our market experience. The resulting value is a theoretical basis for a property’s minimum value in the open market. When prices begin to fall, they generally do not stop until all properties in a market reach their fundamental value.

The chart showing asking prices and value ranges displays all the numbers in an intuitive format and shows the relationships between the numbers. For instance, in the chart below, the negotiating range and the comp range is significantly above a property’s current cashflow value. A buyer wanting to pay cashflow value will not obtain this property as market comps reflect a large ownership premium.

Comparable Sales, Comparable Rentals and concept notes

Page four of the report has the raw data on comparable sales and comparable rentals used to generate the report. This important raw data eliminates much confusion and debate over current valuations. The sections on Comparable Sales Value and Likely Transaction Price and Cashflow Value and IHB Fundamental Value generates the most questions and confusion, so a more detailed explanation of these concepts is included.

Report notes

In an effort to explain many of the concepts and calculations in the report, we have included a line-by-line series of notes detailing any assumptions.

Ignorance is …

George Orwell in 1984 wrote, “Ignorance is Strength” to describe how power is maintained by the few through the ignorance of the many. Those who are responsible for helping people buy and sell homes have preyed on the ignorance of buyers for generations to maintain their strength. They see little reason to change.

Thomas Gray in “Ode on a Distant Prospect of Eton College” wrote the line, “Ignorance is Bliss” to illustrate that ignorance to a problem creates happiness—while the ignorance lasts. This bliss may be welcome at times when the problem is intractable, but ignorance that prevents people from taking appropriate action does not lead to bliss, it leads to pain.

Ignorance is Pain. Ignorance to the housing market can lead to foreclosure and bankruptcy. There is nothing noble or romantic about ignorance to the value of real estate. I have no need to exaggerate the importance of getting this decision right.

I used the tools encapsulated in this report to avoid buying during The Great Housing Bubble. I have shared my methodology with you, and now, the IHB set up to work with you to apply these techniques to your personal situation.

Informed Decisions

I want people to make informed decisions. Based on these reports, some people will wait, some people will look elsewhere, and some people will buy anyway. We do not attempt to persuade; most people are self-motivated when it comes to real estate, and when contemplating such a large purchase, pressure just makes the process stressful.

In time the numbers will say “yes.” I will know when the time is right because my analysis will tell me. Now, the same information is available to you.

Thank you again for allowing us the opportunity to present ourselves to you in this manner. We look forward to working with you.

Sincerely,

Larry Roberts

When you are ready to buy or sell a home, we are here to serve you.

To facilitate your home search, go to http://www.idealhomebrokers.com/ and set up a property search; this is a good idea for both buyers and sellers. As a buyer, you want to spend some time watching the market and see the location and the quality of properties that meet your search criteria. As a seller, you should also watch the market for properties because these are your competitors vying for the same buyers. Spending some time watching the market will help you understand the pricing dynamics in your neighborhood.

On the home page, you will see a box similar to the one presented above. This is your portal to the Multiple Listing Service (MLS). You can create custom property searches based on a variety of criteria, and with registration, you can save searches, and even have the results emailed to you or sent to an RSS feed.

At the top of the map, you see two tabs: one for the map view and one for a property detail view. Once you have selected a property in the map view, the program will automatically switch to detailed view and provide additional property data. To switch back to the map, click on the map tab.

The map itself can be navigated by dragging the map around with your mouse, and by zooming in to see specific neighborhoods and zooming out to see entire cities or regions.

There is also a link to register with the service to get listing updates, save searches and perform other tasks. Registration is very easy and requires little personal information.

Enter your name and email address and choose a password. That is it. There is no more information required than what you entered when you signed up for this email program.

In the upper right corner, there are 3 links, a quick-jump navigation box, a menu to change the underlying display, and a pop up with detail on the neighborhood being viewed.

Once you have set up an account, you will want to click the “login” link to access your saved searches and other tools. The “help” link brings up a box with pertinent help information. The “Chat with the Team” link will call up a box allowing you to chat with a representative of Diverse Solutions the provider of the mapping system. This chat function will not link you to a member of the IHB.

If you want to quickly zoom to a particular city, zip code or MLS listing, you can directly put this information in the “jump” box and press “enter.” The system will automatically take you to this location without having to navigate the map.

You can view the map as terrain, an air photo, or a hybrid between the two. It is very similar to how Google Maps or other mapping applications present their data.

Once you are zoomed in to a specific area, you can click on the “map statistics” link on the side of the map, and various statistics about the area will be displayed.

The default settings will show you every property for sale in the mapped area. You will want to narrow your search to view only properties you are interested in.

On the left side of the map is a series of boxes and sliders that allow you to input your search criteria. You can either manually enter information into the boxes, or you can use your mouse to adjust the sliders beneath the boxes, and the software will automatically put numbers in the boxes for you.

Whenever you are searching for properties in a market, it is wise to broaden your parameters to see properties just outside your range of consideration. Oftentimes what happens is that you see a fantastic property outside of your normal parameters that catches your attention. This may reveal the parameters you thought were important may not reflect your true needs and desires. If you set your parameters too tight, you might have your ideal home filtered from your view.

The first data point is the location where you wish to search. The MLS allows you to search by city, community, tract name or zip code. As you type the software fills in potential locations that match your query. The database is extensive.

The next data point is the price range for your search. The IHB learning center has information on how to properly estimate the amount you should pay for a home based on your savings and income. For purposes of watching the market, you may wish to extend these ranges a little below and a little above your intended price range to get a better understanding of how location and quality impact pricing for properties that are in your price range.

The next data point is the number of bedrooms and baths you require. Note that this is what you require, not necessarily what you desire. For example, if you want a 4 bedroom, but you only really need a 3, you should set this at 3 bedrooms to see the full range of available housing opportunities. If you set it at 4 bedrooms, you will not see the available 3 bedroom properties, and you may miss the right property for you.

The next data point is the size of the home. My advice is to leave this as wide a range as possible. Telling yourself you must have a 3,000 SF home because you have too much furniture is like having the tail wag the dog. Bigger is not always better.

The range of lot sizes is next, and I also recommend you leave this as broad a range as possible. Also, lot size can be misleading. A house with an alley may have a large lot but not have a useful back yard.

In my opinion, the “days listed” data point is rather meaningless. If a house has been on the market for a long time, it is likely overpriced, but to filter out these properties can be counterproductive, particularly if the seller suddenly and dramatically lowers the asking price.

I also recommend leaving the range for year built as wide as possible. You may find a home that is either newer or older than what you were looking for is actually better suited to your needs. Many older homes have been tastefully updated and present as well as new homes.

Another search tag is to show only those properties that have a certain percentage price drop recently. This is a good filter to have, particularly on an email update. It is common for homeowners to give up holding out for a high asking price and dramatically reduce their price. This is generally a sign of a motivated seller ready to negotiation a sale in earnest.

There are also a series of check boxes to expand or limit your searches to include many different property types. This can be useful if you have very specific features you are looking for. Also, you can set up different searches to show both the for-sale market and the rental market for a given set of search parameters. That information can be very useful for establishing comparative rents and determining fundamental valuations.

You can also filter your search results to only display properties within a specific school district. This is a very important feature among many buyers. It it important to note that school district boundaries do not necessarily follow city boundaries. For example, areas within Irvine are serviced by the Santa Ana and Tustin school districts as well as the Irvine school district.

The Walk Score is a subjective measure of how easy it is to live a lifestyle without an automobile. Many downtown urban areas earn high walkability scores because the conveniences of modern living are readily accessible on foot. Most suburban areas score poorly for walkability. With the reliance modern society has for automobiles, holding out for a high walkability score will filter most properties.

As a sign of the times, there is a filter where you can see only short sales and preforeclosures or properties owned by lending institutions.

You can also opt to see listings on Zillow. There is value in this, if you are looking for properties offered for sale by their owners.

The final checkbox tells the software to only search in the mapped area. There are times when the area you are interested in does not have a specific geographic designation. You can use this checkbox when you have zoomed in to a specific area or neighborhood and you only want to see properties in that location.

The lower left button will reset all the parameters to their default values. Don’t press this button by mistake or you will lose all the settings you input.

The lower right button tells the software to run the search and return your properties on the map display.

The search tool on the home page of Ideal Home Brokers is very powerful. You can see all properties that meet your criteria and find your ideal home.

Thank you again for allowing us the opportunity to present ourselves to you in this manner. We look forward to working with you.

Sincerely,

Larry Roberts

When you are ready to buy or sell a home, we are here to serve you.