Today we will show you the main variances between real estate stats and real estate comps, and by the end of the entry, you’ll know how to differentiate one from the other.
These help professionals gauge the health of the marketplace overall as well as to set expectations throughout the selling process for both buyers and sellers.
It also helps them communicate how competitive the market is right now, which costs are trending, whether the marketplace favors buyers or sellers, and how quickly assets are going to move.
These stats help consumers that have decided to purchase something to evaluate the different options on the market. Furthermore, they also help sellers comprehend how their products stack up in comparison to other products currently on the market.
The main characteristics of real estate stats
Market statistics can elevate above the individual and take the marketplace with all its features, to look at the health of both the buyer and consumer and their ability to participate in the market.
Moving on, market data will help you answer questions like these ones:
- How many people are in the market looking for a property to buy?
- Do people have the money to purchase high-priced houses or cheaper houses?
- How many other houses are there for people to choose from?
- How do the features of my house compare to the others on the market?
- How quickly do houses sell after being listed?
- Are other houses more attractive than my house?
- Is the cost of my house in line with the others on the market?
Market statistics are very important to anyone who wants to understand the housing market In general, whether they are actively trying to sell or buy a property at the present time.
It also removes the individual features of the house from consideration, letting people consider what all the properties in a particular area (whether it’s ZIP code, city, county, etc.) are doing. Moreover, market stats remove some of the emotional aspects of the transaction, so that people can look at housing as a commodity, such as lumber and oil.
Besides, market statistics assist in setting the table to help clients and professionals to start talking from the same get-go. This means you can inform a client of how quickly properties are selling in their area and what percent of the listing cost is the right one.
This can help them understand how their process could go based on what is occurring around them, beyond the recent sales.Also, real estate stats have a longer historical time horizon in comparison to comps, which typically don’t go further back than six months and can also help clients understand current real estate market conditions compared to the previous year.
Thanks to this, you will be able to see the market’s direction, and it will allow you to manage expectations.
In the end, market statistics matter to professionals who work with clients who rely on their expertise to tell them what is happening in the market overall. Most clients are not aware of why median sale price trends are important to them and how understanding the temperature of the market can inform their experience going through a deal.
For instance, it may be a better time to purchase a condo than a single-family home, based on available inventory and pricing trends. Additionally, it may be the perfect time to put a property on the market, given how low inventory currently is and has been trending for the last year. It might be time to consider a different ZIP code over another. Thanks to the market stats, you will have the ability to figure out alternatives for your clients.
The main characteristics of real estate comps
Now it’s time to talk about the real estate comps. To help understand this concept, we are going to give you an example of when someone purchases a new vacuum cleaner. Whenever you go to a shop to buy a vacuum, you usually stand in front of all the models and start comparing characteristics and evaluating costs, searching for the model that will suit your needs.
A person standing next to you is clearly doing the same but could come with a different purchase based on their individual preferences.
A pet owner could require certain tools and features that someone without pets doesn’t need. Besides, an older person may need a lighter vacuum, which could cost more money, whereas a young college student doesn’t mind the cheaper model.
The one feature that unites every person in the market for a vacuum is that they are looking for a vacuum. Value is placed on aspects of each model based on their specific demands, meaning that what matters to one person may be irrelevant to another.
This is why people are willing to pay different prices based on the different characteristics that matter to them. Comps are very similar. They look at the individual aspects of houses that were recently sold very close to the area of a property in question.
Among the features that are compared you have:
- Does the house have a pool?
- Does the house have a yard?
- Does the house have a terrace?
- Does the house need significant upgrades?
All of these features can add to the perceived cost of a property, depending on if buyers want to pay more money for them. What matters to one buyer may not matter to another one who would not put more money for that specific feature.
Someone with a limited budget may be more committed to compromising on characteristics just to purchase a house. Others can’t live without certain things and are willing to pay more for what they need.
Either way, comps study specific features in a very limited area and compare one another at a specific moment in time. Comps are used to set the list price of a house and assist sellers in knowing how their property stacks up compared with others that were sold recently.
Comps are relevant to most people who have decided to actively participate in the market or have made the choice to buy or sell.
Extra features you need to consider
Besides the main differences between real estate stats and real estate comps, there is extra information you need to be aware of.
Comps aren’t always going to convince buyers
Buyers are complicated. When it comes to comps, there’s a good probability they may not care as much about what similar properties are selling for as they are about how much money they have to spend.
That’s why it’s necessary for you to try to be realistic about your listing when you are comparing your house to comps.
“You can’t just look at houses nearby that have recently sold and feel you have the full picture about the market in which you are selling the house,” says Jacque Fairbourn, a PR rep that works for DoHardMoney.
“Keep in mind that buyers are looking to pay as little as they can for the house they want and will not be looking at the comps as you do”.
A good selling agent can help you figure out how to handle the sale you want to get from your house, the market around the property, and the price that buyers are willing to pay for the house.
Comps change when the market is hot
When the market is cool and buyers take the opportunity to pursue their goals, you may find yourself in a position where neighborhood comps can’t do anything for the home’s prices. Buyers will underbid to no end because they are aware that the market is leaning towards them. Nonetheless, the opposite is quite true. When the market is hot, comp costs may not be able to catch up with the current demand.
Generally speaking, if comparable homes were selling for three to six months before yours is listed, it may not be attractive enough for the buyer’s demand.
“One of the things that should be clarified for buyers early on, is that a listing price is just a number, even more so in hyper-competitive markets,” says Kate Ziegler, a realtor at Boston’s Realty.
She also says that if your property is somewhat of a neighborhood home because of its size, or just better than other recently sold properties, you should raise the cost, especially in recent listings sold at prices that were the result of bidding wars.
“To get a sense of this kind of demand, ask your realtor to calculate the average percent over or under, and ask them if similar properties have closed recently” she states.
As you can see, real estate comps are not that stable if we compare them to real estate stats. Now that you have this information, you are going to be able to understand more about the housing market, and you will have better chances to buy or sell a home.
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