Real estate market analysis is a way for realtors to assess information that will affect a property's valuation and financial feasibility.
It's also a good way for a realtor to get a sense of a property in relation to the market around it. This is a vital asset to realtors, especially as the market braces for first-time home buyers who need more guidance.
Here's how to perform market analysis for a property, and how you can go deeper to provide useful information to your clients.
The first step is property analysis. This accounts for a wide range of factors, such as:
Basically, you're assessing the house and the neighborhood it occupies. You're not appraising the house, per se, but you're evaluating the value of the home relative to the value of homes in its vicinity.
From there, you can assess comparable properties.
The best place to start is with homes sold in the past three months. Look for homes within your focus property's radius, ideally within three miles.
If you're doing this on your own, tools like Zillow and Trulia are great for reviewing recently sold listings. From there, expand your search to properties sold in the last six months.
Your goal is to find a few comparable properties, somewhere between three and five. These properties should have features similar to your focus property, like size, amenities, location, and other features. This is your comparative market analysis.
You can then expand your search to current comparable listings. Again, focus on properties within a three-mile radius posted in the last three months.
Once you have a property list, look for a property that's definitely worth more than yours. This is your ceiling price. Then, look for a property that's definitely worth less than yours. This is your floor price.
These two prices, taken together, will give you your price range. Your property's realistic market value will fall somewhere between the two.
Your market analysis isn't just a tool to assess the value of a given property. It's also essential in establishing real estate proforma (i.e. cash flow projection). Basically, it's an educated estimate.
But to make it, you're going to need a lot of information about the market.
This is where an in-depth understanding of your market will benefit you. Maybe you spend some time researching recent trends, like the growing need for multigenerational homes. Maybe you can look into buying research paper online that will provide a deeper economic analysis.
If you want to go deeper with your real estate market analysis, our blog is a great place to start.
We offer analyses of the latest trends impacting United States and international real estate market trends. If you need somewhere to start reading, check out this post on key Millennial real estate buying trends.