Blog

Metrics are the Key Benchmark

Metrics are the Key Benchmark

Whether you are a buyer or seller, having a sound knowledge of property values will remove the guess work from quoting, and the fear of being taken advantage of. The only data that matters are comparable sales. A detailed analysis of comparable sales will give you an extremely accurate measurement of the current value ... it’s as simple as comparing apples with apples!

Think about it. When you go shopping, the only difference in the price of the produce you buy is based on weight and variety, more commonly described as a metric comparison. The value of property is determined by the land area, location and what the improvements are. Sure, it is more complex than buying fresh produce, but the principle is the same. Land values are relatively simple to calculate because there are no improvements to take into account. Apartments on the other hand are generally driven by size and aspect. Houses are far more complex because there are more variables which might explain why two homes that look identical sell for different prices. For example, it could be that the land areas are different, or one has been renovated or is in a better location. I am sure you have all over heard friends discussing what a property sold for on a square metre basis? This is termed comparable sales analysis.  Agents do it all the time often in their heads, they are simply comparing one sale with another like property, not on the price paid but, on the price, paid per square metre. It is only then that you can get an accurate measurement of comparative value. Statistics don’t lie and naturally, the greater amount of data you compare it with, the more accurate your analysis will be. Herein lies the problem, getting the data. The data that agents typically rely upon is owned by the REIV or RP Data. But unless you are a member or subscriber, you will not have access to this data and believe me the data is good. It contains everything you need to know, land areas, images, floor plans, aerial views, when the property was last sold etc. As a buyer or seller, some agents will assist you by supplying this information (sample) but how are you to know whether it is accurate let alone valid? I have no doubt that there will be sales contained within the sample that are relevant but what good is that if all the other sales are not?  When selling, most agent’s appraisals do include sales data but very few agents actually provide you with any analysis. The data available on the internet is more than helpful, but it is not comprehensive. And their estimates on value, which is based on algorithms, is at best a guide and should not be relied upon under any circumstance. So, what is the answer? Ask the agent to provide you with one comparable sale that best matches the property you are planning to buy or sell and do your own analysis. The alternative is to seek independent advice who have access to the same data agents have.

Rob's Blog