Real Estate Market Analysis Through the Simplest of Steps
Steering a is not as difficult as you may perceive it. Yes, some technicalities might make things a wee bit arduous to comprehend, but overall, it’s not that cumbersome to understand the real estate market analysis processes.
When doing a real estate market analysis, you should first use recent sales prices rather than asking prices for homes currently on the market. This is because the listing price is what a seller covets to attain, while the final sales price is what the seller actually gets.
When conducting a market analysis, the real estate investors’ process is similar to what an expert appraiser does. Once you ensure adherence to the standard procedures, it will dan on you that there lies no big difference between what you think a property is worth and the price the appraisal comes in at.
Here are the important steps you need to follow to correctly analyze a real estate market and make an informed decision.
Research Neighborhood, Quality, & Amenities
Gathering more details about the neighborhood is paramount when you are trying to create a list of properties that you should consider buying. You need to look where the property is situated and note the type of buildings or structures that stand in the vicinity.
If the house backs to a garbage dump or major highway, you should simply delete that property from your list and move on to the next one as these things affect the value of that particular property.
Many other things can significantly affect property value, such as access to public transportation, proximity to shopping and the distance to school, and recreational amenities like parks and beaches that are close.
Obtain Real Estate Value Estimates for The Area
Calculating the average sale price per square foot for home sales in the area you are thinking of is an intelligent way to determine a “ballpark” real estate value estimate.
For this step, you can get assistance from the local real estate agents, property management companies, an online listing database, and the county assessor website are all good resources to use.
You should always be mindful of the sheer fact that these average calculations are just calculations. They might not take into account the unique aspects of the house or the neighborhood that may increase or decrease the value of your real estate property.
Select Similar Properties for Your Real Estate Market Analysis
It would be best to begin your initial real estate market by choosing six similar properties. Three of them should be homes in the neighborhood that have been sold in the past few months. Then choose three more homes that are currently on the market.
When you are selecting similar properties for your own property, you should look out for the following things;
– Houses with the same number of bathrooms and bedrooms
– Property with a similar lot size and shape.
– Houses that are within 10% to 20% square footage of your intended purchase
– Shortlist houses that have a similar construction date, elevation, and a number of floors or stories.
– Select homes that have similar features, such as a free-standing garage, swimming pools, patio deck, and scenic view
– Select properties that are in the same school zone.
Calculate Average Price of Similar Listings
With this information in your hand, the next step is to create a spreadsheet for all the properties, including those you intend to buy. Your first column should have each house by the address.
After that, you should create individual columns for specific features and amenities;
- Square Feet
- Number of floors
- Selling or listing price
- Age of the house
- Bonus areas or Recreation room
- Swimming pool
- Garage, carport, or on-street parking
Once you have completed your spreadsheet, you should calculate the average price per square foot for each house that you have shortlisted.
Tweak Your Market Investigation
Each piece of property is unique, so the chances are that every home on your list does not have the same features and amenities. To ensure that you are comparing peaches to peaches, you will need to make adjustments to the properties you are comparing.
By utilizing the spreadsheet design, you’ll have the option to see an example of what each house’s particular highlights and conveniences mean for the deals or the listing price and the cost per square foot.
Also, you should compare the data on your market analysis to the actual features and amenities of the subject property and the information from your real estate inspection reports.
There is a chance that mistakes can happen during this process but don’t sweat; keep repeating until you get it right.
The Final Step
Once you have been through the whole process, you have a clear idea of what the house is worth. Your final step should be to get the ball rolling and get your local team to work.