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80/20 Rule & How It Relates To Real Estate
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The 80/20 rule, also known as the Pareto principle, states that roughly 80% of effects come from 20% of causes. This principle can be applied to many areas of life, including real estate.
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In real estate, the 80/20 rule can refer to the fact that roughly 80% of a real estate agent's business comes from 20% of their clients. This means that a small percentage of clients are responsible for the majority of an agent's business. This could be because these clients are particularly active in the market, have multiple properties, or refer a lot of business to the agent.
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The 80/20 rule can also be applied to the real estate market as a whole. In many markets, 80% of the properties are sold by 20% of the agents. This is because some agents are more successful and have more listings, while others may have a smaller number of listings.
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Understanding the 80/20 rule can be beneficial for both real estate agents and property buyers and sellers. For agents, it can be helpful to identify the clients that generate the most business and focus on building relationships with them. For buyers and sellers, it can be helpful to work with an agent who has a proven track record of success in the market.
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Another way the 80/20 rule can be applied to real estate is how it relates to property values. In many markets, 80% of the value of homes is concentrated in 20% of the most expensive homes. This means that a small number of high-end properties drive the overall value of the market. This can be important to consider when buying or selling a property, as the value of the property may be influenced by the values of surrounding properties.
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For home sellers understanding the 80/20 rule concept can save you time in selling your home. Applying the 80/20 rule, you stop trying to sell people on the entire home. Applying the rule, you can highlight the 20% of your home's features that make it special. The remaining 80% of your home still affects the buyer's decision, so do not neglect it, but in photographs and showings, feature the elements that make your home special.
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Overall, the 80/20 rule is a useful principle to keep in mind when it comes to real estate. It can help agents identify their most valuable clients, buyers and sellers understand which agents are most successful in the market, and how property value can be influenced by a small number of high-end properties.
