Gaining Perspective & Getting a Better Handle on Pricing and Value

By · Friday, May 4th, 2007

Historically a traditional rate of appreciating which would be considered good to great would be 4% to 6% year over year appreciation. For this illustration I will utilize 6%.

What would be the value of a home which was purchased in 2002 for a price of $300,000 at a year over year appreciation rate of 6% for a period of 5 years?

I would suggest that you discuss (utilize visuals) this exercise on all your listing/pricing presentations. You can determine what rate of appreciation they are truly asking for by using the price they are expecting. As you go above 6% you begin to get unrealistic. This will help drive historical reality back to your clients. I know some people will not be able to be this realistic or simply are not willing to be. Fine! It still does not change the facts. Keep in mind that this information is meant to be used as a benchmark not an exact science. You will always have to take into account upgrades, location and other unique aspects of any property.

ResalePricevDemand

Download the price vs. demand charts:

To receive an unrealistic short-term super aggressive year over year appreciation rate of return you need an environment that has –

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