Analyzing and Understanding your Market: Intro

Competent agents understand their markets.  For the best and most successful agents this market expertise leads to competitive advantage.  This is especially true in the luxury market where clients are often analytical folks like corporate executives, entrepreneurs, and independent professionals.   

Here are a few basic tips on analyzing your local market:

1. Define the geographic area(s) that YOU serve.
2. Pull the top ten percent (by sales price) of properties sold in the past 12 months.
3. Segment this list by price.  Break the properties sold into logical price bands.  You should have an intuitive sense of where the natural price segments are in your market.  It might look something like this:
4. 1. $500k-$749k
   2. $750-$999
   3. $1M-$1.49M
   4. $1.5-$1.9M
   5. $2-$2.49M
   6. $2.5M+
5. Look at the following metrics for each price band:
6. 1. Sales to Expiration (percent that actually sell vs. expiring)
   2. Average Days on Market
   3. List-to-Sales Ratio (sales price is what % of list price)
   4. Approximate % of new vs resale.  This may not be available in your MLS, but give it your best estimate.
   5. Number of Closed Transactions (these are what we call REAL BUYERS)
   6. Listed vs. Sold (aka the Odds of Selling a Property)
   7. Listing Term that your competition is getting in each price band.  Again, this will require you to make your best estimate as to an average.

You probably already know these stats for the market as a whole from your standard MLS reports. That's great as it will give you an immediate sense of how each price segment at the top of the market differs from the overall market.  Since most reports, especially those you see on TV and read in the press, tend to look only at aggregate market trends across all price points, you and your clients might be surprised how different conditions are in the various price tiers at the top of the market. 

This can give you very important information and competitive advantage as you are:

• Deciding which segments to target
• Positioning yourself in the marketplace
• Establishing client confidence
  
• Setting the expectations of buyers and sellers
• Negotiating a listing term
• Pricing the property
• Negotiating a purchase offer

More on the individual metrics for each price band in upcoming posts...