Calculating Appreciation the Easy Way



In a minute I’m going to introduce you to a very simple calculator that will have you figuring appreciation rates in seconds.  But before we get right into the calculator, let’s discuss why you might need to know an appreciation rate in the first place.

Imagine yourself getting ready to go out on that listing appointment.  You’ve prepared a good CMA (comparative market analysis) and you’ve looked at all the recent sales in that area fairly closely, making mental notes in case the seller doesn’t like your price.

What if you could enter a couple of numbers into a calculator, and click a button and have the historical appreciation for the seller’s subdivision or comparable properties?  You can, as you’ll se in a minute.  All you’ll need is two pieces of information you can get from your MLS.

Or what about dealing with that buyer that is under the mistaken impression that he can low-ball any house and effectively steal it because it’s a “buyer’s market”?  Generally speaking, no amount of arguing will dissuade him, but what if you could pull hard data and show him what the market really is saying?  Using this Appreciation Calculator, you can do just that.

All you need are two pieces of information — the base value and today’s value, and of course, the time frame.  Let me show you what I mean.  Suppose you had a “target home” that was purchased 5 years ago.  Go to your MLS, and pull up all homes (or all homes in a neighborhood, or some other subset of the market) and get an average sale price.  Your MLS will do that automatically.

Next, go to the average sale price in the most current year for the same subset.  Let’s assume the base value was $200,000, and today’s average for the same subset is $250,000.  You have a growth of 25% over 5 years or 5% per year.  Of course you can do that simple example in your head.  Using the calculator, you can put the numbers in and click a button and instantly have the number.

Now you take the appreciation rate and apply it to the sample property to arrive at an estimate of what it’s appreciated value is, based on the appreciation of the market or market subset.  Suppose the seller want’s more than that, or the buyer wants to offer substantially less than the average list-to-sale price would reasonably indicate, you now have the hard data to help guide them into a better decision.

And, having accurate appreciation rates gives you a huge advantage over the typical agent, who is probably just winging it.  So try out this free calculator and let me know what you think. 

Note: To use this calculator, enter the average sale price (from your MLS) for the beginning year, then enter the current average sale price, and finally the number of years. The result will be the average appreciation rate over that term. For example, a customer originally bought a home in 2004 and is considering selling now. Take the average sale price of homes in that market or market subset for 2004 and then for the same market or market subset in the current year. Then enter the number of years and the result is the average appreciation rate for that term.

 
 
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Matt

I give away about 99% of all my technology and digital training content, completely free of charge, because I want to see other agents have the same kind of success that I've had. But one thing I charge for is my Ultimate Website technology. This is the web technology I created for myself that turned my real estate practice around overnight, and now I license it agents everywhere. But right now it's too popular and is currently waitlisted. Click here to get on the website as soon as possible and I'll notify you as soon as new invitations become available.

Comments 3

  1. author Chris Johnson posted June 1st 2010. 7:59 pm Reply

    Your calculator does not account for a compounded value, so it’s technically not correct.

    • author Matt Jones posted June 1st 2010. 8:20 pm Reply

      Hey Chris,

      Thank you for reading and for your comment. You are absolutely correct. I’m trying to make a very simple calculator that any agent can use to get them close when advising their clients. It doesn’t account for compounding, for individual market tiers or segments, or for inflation adjustments, etc. It’s just intended to be a “pretty-darn-close” simple appreciation calculator. Thanks again for reading and for your very accurate observation.

  2. author Build the Ultimate CMA Using this Tool « Blog, Matt. Blog! posted June 15th 2010. 12:37 pm Reply

    […] and then I add that figure to the purchase price.  Now, instead of all that math, I just use the Appreciation Calculator that I recently shared with you.  Certainly this particular method, alone, is rather subjective, […]

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