Dave is the Managing Broker and founder of The DuPont Group, a Real Estate Investment and Brokerage Company. The real estate landscape is changing rapidly, as are all segments of our economy. Their job is to both assimilate and leverage the best informational and transactional services available at all times and to be innovative in that process. Over the course of working with thousands of buyers and sellers, Dave created the most actionable and informative real estate valuation protocol in existence called REAVN ‘HomeSmart’, which includes the Home Value Ratio (HVR- most important thing to know about ANY home) and Relative Utility Index (RUI- like a credit score for homes). David DuPont leads a team of agents, vendors, and contractors and has personally closed more than 150 homes and ~$300m in home sales.
Q.1. Tell us your life story. How did you become the top broker in Marin County?
I started developing a real estate pricing model while working at Merrill Lynch in 2005-06 and left in 2007 to start a real estate brokerage business with the competitive advantage and differentiation of having better pricing information. Real Estate sales ground to halt in mid-2008, and most agents were really struggling. Buyers were fearful because prices were plunging, and bad news was crossing our screens daily. The well-documented by-product of this economic carnage was financial Armageddon for sellers but a HUGE opportunity for homebuyers- the trick was getting the turtle out of his shell- getting people to buy, especially when banks were resistant to lending. Within 18 months of starting in the business, I was among the top 20 brokers in Marin County by sales volume, and within three years, I was among the top 3. My trick was to give buyers more meaningful and actionable data- and by data, I really mean a story with numbers about why they should buy a house then.
Q.2. What unique perspective do you hold about home valuation?
The way homes sell- the process which involves realtors, appraisers, and mortgage brokers; specifically how they are appraised, underwritten, and recorded at the county- hasn’t changed much in a CENTURY. It’s extremely developmentally delayed. Correspondingly, Real estate sales data is misunderstood at every level, from the CEO of the major banks all the way down to individual appraisers on the beat. Every home is a complex “bundle” of characteristics that create a price. These “bundles” are so complex that the human mind cannot price all of the relative relationships, and humans resort to a heuristic process that bundles larger things like the neighborhood, community, and school district into various buckets. And these buckets create a relative framework for humans to arrive at any single price or price range. These price relationships for ANY cluster of homes are relative but not linear- they are exponential. People with resources will pay far more for the very best real estate “bundles” than they will for those almost as good, and vice versa for undesirable “bundles.” Today, the missing link is breaking this human heuristic pricing process down, so the data is more meaningful and actionable.
Q.3. Tell us more about ‘Home Smart’ and its implications on real estate.
The best models are those that most closely match the process being modeled. Finding shelter is a human need. While it has changed greatly since the days of finding caves close to good hunting grounds and water, the process is archetypal and has consistent patterns- it’s hierarchical and competitive. All real estate is a function of the land on which the home is built- its actual site, the neighborhood, its infrastructure & schools, the relative proximity, the hazards, etc. These bundles of characteristics create relative desirability, and this creates the exponential pricing curve. The key here is that every home price is really two things- it’s a Lot-Location Value and a Structure-Condition Value. Its Lot-location Value (LLV) creates the pricing matrix for the Structure-Condition Value (SCV). This relationship is captured in the Home Value Ratio (SCV/LLV). Why is this important? Because the Lot-Location Value is generally a purely appreciating asset while the Structure-Condition Value is generally a depreciating asset, this HVR ratio tells you essentially how any home will appreciate relative to its housing stock and what it’s going to cost for that appreciation. Put more simply: homes with higher-than-average HVR will cost more than average to achieve the same level of return.
Q.4. How will home buying evolve over the next decade?
There will be a few big changes 1) a more streamlined lending process which with a different appraisal process and crowdsourcing mortgage funds in addition to traditional lending; 2) Most home buyers will not use a realtor in the same way that they do today. Much of the game theory which creates strategic negotiation and contractual moves is emotional, archetypal, and can be programmed if you have the real estate deal experience. Last, one of the most important skillsets for an effective buy-side realtor is storyboarding pricing- explaining the why and how. With the suitable models, data sets, experience, and platform- this can be programmed to be BETTER than the average buy-side agent.
Q.5. What mistakes do home buyers typically make during a transaction?
Throwing the baby out with the bathwater! Real estate deals don’t follow traditional business etiquette because they are usually packed with emotion on both sides. Buyers get emotionally hung up on gut-wrenching sellers’ moves and sometimes ignore the larger picture. Also- don’t feel like you must use the busiest, most successful realtor- this is a mistake and costs buyers, money. Find someone you can functionally communicate with, who isn’t too busy, that you trust, and who has a grasp of buy-side deal game theory.
Q.6. What interesting hack should buyers use while financing a home?
In 7-10 years, most people sell. I like interest-only ARMs combined with separate mortgage pay-down savings accounts invested in short-duration bond funds.
Q.7 How do you teach grit to your kids?
Give them room to make lots of mistakes. Not sure if it’s working.
Q.8. How will the DuPont Group help home sellers in Marin, and how should they reach out to you?
In 2007 we created a market preparation process called FLASH BRANDING, well-thought-out home preparation, professional photography, cross-platform marketing, etc. It’s essentially now what all top agents do- some better than others. The key part that we can do better is the mathematical analysis of calculating the minimum amount of investment that will lead to the maximum amount of gain at each seller’s exhaustion point.
For more such insights, visit www.home.llc