Not so long ago, when you were trying to communicate the market value of a home to a prospective buyer, you prepared a competitive market analysis (CMA). The report compared the home being considered with others in a comparable neighborhood, with comparable features. You compared a 4-bedroom, 3-bath traditional home with another of the same size.
And it worked well.
The problem is, today’s home buyers aren't just “buying” a certain number of rooms in a desirable neighborhood. They’re looking at value, not just as purchase price, but in long-term ownership.
“Big data” is a term that describes a gathering of data that is highly focused and in-depth. The politicians have been relying on big data to better understand voters in narrow segments—like college educated, minority women under the age of 30 who live in a particular state. Big data provides a deeper understanding of behavior by particular sections.
That includes home buyers. You can no longer sell the value of a home by comparing its structure to another “comparable” one. You have to dig deeper when creating a comp for your new home buyer.
Lifestyle preferences are more important than the number of bathrooms or the square footage. You need to calculate other factors, like the proximity to the best schools, the view, and the age of the property, to name just a few.
Can you calculate the value of an easy commute? How much is it worth to your buyer to be able to walk the kids to school? When reviewing comps, do you take into account that one home will need to make a major renovation in the not-too-distant future, like HVAC or a new roof? Just as when you purchase a new car, you consider the cost of maintenance, you need to look at a property’s value in relation to ownership, not just purchase.
Forget the way you’ve been doing CMAs. You need to do better to sell the value of a new home to a prospective buyer. A standard CMA algorithm doesn’t take into account enough of the criteria that matters to home buyers now. They do more research than ever before, so they come to you more informed. They won’t be satisfied with a run-of-the-mill CMA. Use a CMA platform that gives you the ability to customize the report to deliver a value that accurately reflects the home, and not just its physical attributes.
“Value” is in the eyes of the beholder. What matters to your particular buyer? First, find out. Then enter as much data as possible into your CMA program.
Then, go farther. Look at the cost of ownership. In a ten-year span, what will it cost to live in this house? How much will the utilities be for one house without energy efficient systems as compared to a new one with the latest eco-friendly advances?
Let’s also estimate the cost for replacing the roof in seven years, and the commuting cost for 20 miles, as compared to five miles.
You add it all up, and the new home you’re selling presents a total cost of ownership that is $27,000 less than the “comparable.” Can you sell that?
The housing market isn’t the “way it used to be.” Your CMAs shouldn’t be either. Technology is giving you the tools to better define “value.” It’s your choice whether or not to use it. Do you want that advantage to go to your competitor?