THE EQUILIBIRIUM THEORY OF REAL ESTATE

reprinted from the Agent Broker Magazine, Columbus Ohio May 2005

 I was showing homes in the Sawmill Rd area to a client who's criteria was up to $180,000, in good to very good condition and at least 1,800 square feet. After our first day out it became evident that they weren?t enamored with the neighborhoods that these home were located in. After driving around on their own they asked about some other neighborhoods in the area that seemed more appealing. I politely responded by saying  "you don't get to pick the neighborhood. The neighborhood picks you. Unless of course you want to change one of your other criteria or variables then the areas that you find more appealing will be an option." "Do you want to spend more, do more work on it or look for something smaller? If you change one of these criteria then the neighborhoods that interest you will be possible."

 This is what I call the equilibrium theory of real estate at work. Searching for a home is very much a science and it has to achieve a state of equilibrium. There must be a balance reached between what the client wants and what actually exists. Of course any agent who has had even a few transactions understands the basic idea but if you explain the theory to your clients before you begin to look you will minimize the headaches of looking at the wrong homes in the wrong places.

There are basically four variables that go into every home search:

 Location: this includes school district, subdivisions/neighborhoods, premium lots, etc.

1. Price.
2. Condition and/or age.  
3. Size, this includes factors like number of bedrooms, bath rooms, garage size, den, eat in kitchen, etc.

 All four of these have to achieve a state of balance for the search to have a reasonable chance of actually succeeding. If a client tells you that they want to live in Central Bexley, in a remodeled home that is around 2,200 square feet or larger and pay only $200,000 to $225,000 it doesn?t take much research to see that this isn't going to happen.

 I make sure every client understands the four variables of location, price, condition/age and size. I use my experience to demonstrate if their search criteria have achieved equilibrium or not. If not then they know that something needs to change in their criteria. Of course sometimes you can do this with historical data or sometimes you need to get in the car and demonstrate the problem.

 To achieve equilibrium this Bexley client would have to either search in south Bexley not Central, raise their price range considerably; look for a much smaller home or one that needs a considerable amount of work.

 All experienced agents inherently understand this but use this approach to put it into terms that your client can understand and apply to their search. It will make everyone's life easier.