1. Demand is the number of people who want the property. The more people who want the property, the more valuable it becomes.

2. Utility is the use that a property can be put to or made of. The more uses a property can be put to or made of, the more valuable the property.

3. Scarcity has to do with the supply of real estate available. This supply could be what is on the market, or it could be the total possible number of properties in the area. The more scarce the supply of real estate available, the more valuable the property.

4. Transferability is the key element of value in real estate. You can have the best property in the world, worth millions of dollars, and if you cannot transfer the title to your property, your property becomes worthless. Likewise, if you are a real estate investor and have written a great wholesale offer that has been accepted by the owner, your deal is worthless unless you can get the owner to transfer clear property title to you.

Four Great Forces Influencing Value There are four great forces that influence value. They are physical forces, economic forces, political forces, and social forces. They are called great forces because they are outside or independent of the property itself. When you understand these four great forces that influence real estate value, you will have a sense of when and how the real estate market can change direction.

1. Physical forces are the availability of schools, shopping, churches, transportation, and parks. If these physical amenities are present in your target area, this influences the value of the area in an upward manner. If these physical amenities are not present or are minimally present in your target area, this influences the area in a downward manner.

2. Economic forces are the number and types of jobs available, the wages being paid, where in the economic cycle the economy is nationally, and the interest rates for real estate loans. The economic cycle is a repeating expansion-prosperity-recession-depression cycle.

Real estate value is greatly influenced by the economic cycle. Typically, real estate is said to do well in the expansion

and prosperity phases of the economic cycle and poorly in the recession and depression phases of the economic cycle.

3. Political forces are the types of zoning, pro-growth or no-growth policies, and environmental regulations. A zoning change can greatly affect the value of a piece of property. It is important for you to know the political forces that influence the value of real estate in your area, for both the present and future investment climates.

4. Social forces are the quality of the schools and the number in the area, blighted or well-kept neighborhoods, racial or ethnic strife, and social amenities like museums, art galleries, and concert halls.

Seven Ways to Know Value in Your Target Area There are seven ways to know value in your target area. They include sold comparables, pending comparables, listed comparables, expired comparables, appreciation rates, new or planned developments, and vacancy rates. The first five of these can be obtained from your local real estate broker. The last two can be obtained from the local planning commission and the apartment owners association.

1. Sold comparables are comparable properties that have been sold and have actually closed escrow. Sold comparables set the floor of retail value for real estate.This means that if a sold comparable had a sell price of $125,000, a similar property should sell no lower than $125,000 in a normal real estate market. Sold comparables are useful for properties that have sold in the last six months. Anything sold beyond six months is not considered a good comparable.

2. Pending comparables are properties that have sold but that have not closed escrow. Pending comparables indicate the direction of real estate value. When the pending comparables close escrow, they become sold comparables. If the sold comparables are indicating a value of $125,000 and the pending comparables are indicating a value of $127,000, then you have an indication that the direction of real estate values is going up.

3. Listed comparables are properties currently on the market and similar to the property in which you are considering investing. Listed comparables set the ceiling of retail value for

real estate. They set the ceiling because they have neither sold nor closed escrow. They are merely an indicator of what owners would like to get for their properties.

4. Expired comparables are properties that never sold, let alone closed escrow. Expired listings indicate the value beyond the present market in terms of what retail real estate buyers are willing to pay for property. Retail buyers will buy the lower-priced comparable properties first, all else being equal.

5. Appreciation rates indicate the annual percentage increases in market value. Appreciation rates give you a sense of how hot or cold the real estate market is. Double-digit appreciation rates indicate a hot real estate market. Single-digit rates indicate a good market, and zero or negative rates indicate a cold real estate market.

6. New or planned developments indicate the path of development. When you can buy property in the path of that development, you are helping to ensure that you are buying property that will appreciate in value.

While this may not seem to be important for the Quick Cash strategy, it is. You may very well be flipping the property to an investor who is a long-term wealth builder and who is thus very interested in the property appreciating.

7. Vacancy rates indicate an area that may have potential or problems. Low vacancy rates indicate an area that may have profitable properties. High vacancy rates indicate an area that may have problem properties.

After you discover low vacancy rates or high vacancy rates in your target area, you may want to do some more digging to find out why the vacancy rates are low or high. Do the vacancy rates reflect the historical trend for the area? Or is the area in transition?

Buy the Owners Equity, Not the Owners Property

Now that you know how to determine value, lets take the next step. We have a property owner who is in the foreclosure process and wants to sell us the property. What do we want to buy? Do we want to buy the property? Or do we want to buy the equity? We want to buy the owners equity.