While performing analysis on a property or neighborhood using “comps” or comparable properties is the type norm among real estate professionals, the use of market statistics takes a much broader view by looking at the marketplace as a whole. Statistics help identify trends in the marketplace which also industry participants to better identify possible opportunities as well as potential threats to their real estate holdings.
While market statistics and comparables are critical tools to use when facilitating the buying and selling of a real estate property, it is important to recognize that each have their strengths and weaknesses.
What are “Comps”?
Comps, which is an abbreviation for comparables, are like-type properties used for comparison purposes when valuing an individual real estate property. Comps are an excellent tool for real estate agents & brokers, property appraisers, real estate investors and property owners to get a sense of the local market at a given point in time.
Typically properties identified to be comps would have characteristics similar to that of the property being valued. These characteristics would include the property location / neighborhood, building size, overall lot area, property features & amenities and general property condition. Customarily adjustments are made to each individual property characteristic to come up with a value at a particular point in time.
According to an excerpt from an article published by FloridaRealtors.org, comps “…helps consumers who have already decided to buy something evaluate the different options on the market; helps a seller understand how their product stacks up compared to other products currently ‘on the shelf‘”.
While comps are an excellent mechanism for identifying value, the are not forward looking in nature. Therefore, the users of the analysis do get a full sense of how the market has changed over time.
Due to the current state of the real estate market in the post-pandemic environment, a greater percentage of industry professionals have been using market statistics to advise their clients on buying and selling decisions. FloridaRealtors.org states “Market statistics elevate above the individual and consider the marketplace in general, looking at the health of the buyer and consumer and their ability to participate in the marketplace.”
Market statistics provide a broad picture of the marketplace as a whole and can identify trends which can be used to benefit both buyers and seller of real estate. Since trends develop over a period of time (unlike comps which are more of a snapshot in time), users of the data can better identify current market conditions as compared to that from just a few months ago.
With this rapidly changing environment that we are currently living in, assessing market trends can help identify possible market opportunities or pitfalls to buyers and sellers.
Market Stats in Practice
Home Seller Example
After 20 years of ownership, Michael and Mary Jones wish to sell their large family home as all of their children have grown. They have contact real estate agent Bob who has identified two actively listed comps and three recent sale comps in the neighborhood which are similar models and are in similar condition to Mike and Mary’s home. These comps had prices ranging from $535,000 to $565,000 with marketing time periods averaging 45 days.
Bob is an experienced broker who constantly reviews market statistics and is aware of a significant decline in the level of inventory in the Jones’s neighborhood over the past 12-months which has resulted in a trend of rising prices.
As a result of these trends, Bob recommended an listing price of $589,900 which resulted in a closed sale of $585,000 after just 5 weeks of marketing time. If Broker Bob did not review the market statistics and solely relied on the recent comparables, the Jones’s may have sold their home for much less than the $585,000 they have received.
Home Buyer Example
John and Heather Robinson are looking to purchase their first home and are interested in a three-bedroom home located within two specific neighborhoods in their local community. The Robinson’s know real estate Gina Marky who will help them in the process.
Gina has looked for properties in the two neighborhoods identified by the Robinson’s and found there are nine listings available which range from $370,000 to $400,000.
Since Gina is very familiar with the market and reviews the monthly statistics published by her Realtors association, she knows that inventory levels are climbing and their is a trend of price reductions in two neighborhoods.
Gina counseled John and Heather to be patient as with the trend in the market, they can get a better deal then buying right now. After four months of patiently waiting, the Robinson’s were able to purchase a great home for $355,000 – considerably lower than that when they originally started their home search.
Are you thinking of selling?
Based on the most recent data, the current state of the residential market is changing fast. If you are a homeowner and are considering selling your personal residence, vacation home or investment property, now may be the perfect time to do so while prices are still strong.
Our team has assisted sellers not only throughout the state of Florida, but in most major markets nationwide. We take a highly methodical and deliberate approach when working with or clients and have specific strategies to help get the best value for the property.