Best Practices: Preparing a Real Estate Market Analysis

There are many names for a real estate market analysis. A market analysis is also called a comparative market analysis or a competitive market analysis, but it’s all accomplishing the same goal. Performing a market analysis is more than just being objective, it takes market research and extensive number crunching. A professionally prepared market analysis should result in a price range for which a given property will sell in the current market conditions. 

This price is dependent are different factors:

• Property type: investment vs. owner-occupied.
• Condition: move-in ready vs. a fixer-upper.
• Seller’s motivation: this includes the seller’s timeline and expectations.
• Market condition: this includes the interest rates, demand, and inventory. 

Market Analysis Objective

• Identify how to gather information on a property to perform a market analysis.
• Describe real estate characteristics, market indicators, their impact on property value, and how to gather and analyze comparable sales data.
• Recall how to use comparable sales data, property data, seller motivation, market indicators, and pricing strategies to arrive at an appropriate list price range.

Marketing Analysis, Data Resources

Data Source: Multiple Listing Service (MLS).

• Tax records. The MLS should have tax records that show the current property taxes.
• Property sale history. The MLS should have the property history that will tell you what the property was listed and sold for in the past.
• Prior listing history. Pay attention to how the property was marketed in the past, how long it took to sell, and how close it sold to the list price.
• Current condition. Compare the house’s previous pictures and pay attention to how the property condition has changed.
• Property maintenance and appliances. These items should include the type of heating the home has, the HVAC system, the roof type, or any main appliances. Note if any of these items have changed.
• Public remarks. Read the marketing notes and look out for information such as “brand new furnace.” If you note the date that was published, you can get an idea of the current age of the furnace.
• Disclosures. Read the previous disclosures and note the issues that were published in the past. 

Data Source: Title Companies

Title companies are another great data resource. As you’re preparing your market analysis, be sure to reach out to a title company to get additional information on the subject property. When you contact the title company, order a trio.

A trio consists of the following information:

• Property profile. A property profile is a snapshot of the property and relevant data, such as:



• year built
• lot size
• square footage
• number of stories
• property taxes
• assessed value
• zoning classification, and more

• Deed. The deed will tell you whose name it’s recorded under, what type of deed applies (e.g., full warranty), and how the title is held.
• Assessor map. The assessor map will have property dimensions, access routes, streets, and landmarks. You should compare property dimensions and square footage you obtain from the trio against any former listing sheet you pull from the MLS. If there’s a discrepancy, investigate.

Date Resource: Current Property Owners

The current property owners are going to be a valuable resource when performing a market analysis. Questions you should ask the sellers:

• Have they refinanced? Ask the sellers if they have recently refinanced. When this is done, an appraisal is performed. You can use the appraisal value to help you determine the current market price.
• What are the positive aspects of the home? Another great insight is asking the sellers “what’s the best part about living in your home?” This will tell you what valuable amenities or positive aspects the home has that aren’t obvious but would appeal to buyers with similar interests.
• Have they made any changes to the property since living here? The property owners will be able to tell you any improvements they’ve made on the property that will impact their value.
• What property issues have they encountered? This is going to give you a good indication of items that could possibly come up in an inspection. If the homeowners made any repairs be sure to ask for any additional documentation they received from the company that corrected the issue, including estimates, summary reports, or receipts. 

Market analysis: Touring the Subject Property

Before you determine the current market price, you’ll want to tour the subject property so that you can have a strong indication of the current property condition.

The purpose of your visit includes:

• Strengthening your relationship with the sellers and establishing rapport.
• Verifying information gathered about the subject property from other sources; for example, do the MLS reported square footage and the tax record square footage match with the actual measurements?
• Take preliminary photos (final photos will be taken after cleaning and possibly staging.)
• Determining what needs to be done to prepare the property for the market.
• Gathering any additional data that you would need for the listing in the MLS. 

Market Analysis: Property Characteristics that Impact Value

The value of a property is impacted by the property’s unique characteristics, but also by the specific market that it’s being listed in. Just as every property is different, the market that it’s being sold in is too.

Let’s determine the 5 characteristics of a real estate market that not only impact value and uses, but also set real estate apart from other asset classes. 

• Uniqueness: Because of the high-value variance between geographic markets, it’s impossible to generalize the impact it has on real estate values.
• Immobility: The real estate market isn’t going anywhere. We’ve heard it a thousand times “location, location, location!” This is because the location is a huge determining factor in value, the geographic area surrounding a parcel of land is a key value driver.
• Indestructibility: Land doesn’t cease to exist. While improvements on land deteriorate and are subject to destruction, land itself can’t be destroyed.
• Sensitivity to governmental policy: Real estate and financial practices are the two most highly regulated industries. This impacts the value of real estate in general. Monetary policy determines the availability or the lack of funding that’s available to consumers.
• Lags behind national supply and demand driver: Because the real estate market, as an asset class is made up of many local and regional markets, it’s slow to respond to national changes in supply and demand. Land value is highly dependent on location, so changes in the national market have little (or significantly delayed) impact on local markets. 

Market Analysis: Selecting Comparable Properties

Items to consider when selecting comparable properties:

• Properties need to be as similar as possible to the subject property.
• Select properties that are either pending, sold, or active in the market within the last 6 months.
• Try to select 3-4 solid comparable properties when performing a market analysis. 

Market Analysis Conclusion

Remember to trust your gut and rely on all the information that you have available. Don’t be afraid to ask your mentor or broker questions when you are deciding on the final price range for your market analysis. Check back to the Career Corner for more information on how to be a fantastic real estate agent. Always remember, you got this!