A real estate market analysis is a tool that helps us to gather information to know, for example, if we should invest in a property or to determine the rental potential of a city or district. In fact, it would be crazy to buy a property without having information to support a purchase of this size.
Market research is the preliminary step that every investor must take before jumping into the market. The objective is to be sure that the project is viable and that it fits in the existing market.
Not all real estate investors are patient enough to competently conduct a real estate market analysis. If you want your real estate business to stand out from the competition, you need to do some research. So, what is a market study in real estate?
What is a real estate market analysis?
A real estate market analysis, also known as comparative market analysis, is an analysis of current market values of properties, comparable to a property you are looking to buy or sell.
A real estate market analysis should always be done, whether buying or selling a property, as it will help to understand the current market, how much similar properties are worth, if it is an investment property, how much you can charge for rent, etc.
Real estate agents and brokers create reports to help sellers set list prices for their homes and, less frequently, to help buyers make competitive offers.
The information gathered through a real estate market survey helps the seller choose a listing price and helps buyers see if the asking price is too high, low or reasonable.
Why do a real estate market analysis?
There are several reasons to do this type of study, the main one is to have information that allows you to invest and buy safely. Other reasons also include:
- To know if you should invest in one city instead of another.
- To identify which elements hinder investment in certain places.
- To know demographic aspects to determine the evolution of the area where you want to invest.
- To have information about investment projects in certain areas and to know if in the future they will have a development that will increase the value of the properties.
By knowing the housing market prices, you will always have the opportunity to negotiate a lower price and avoid overpaying the market value of a property.
Tips for conducting an effective real estate market survey
Before starting to collect information, it is necessary to clearly define the market in which you are going to position yourself: type of products or services offered, type of market (individuals, companies, administrations, etc.), target geographic area, etc.
A well-defined market is an essential starting point for conducting a relevant study.
- Property analysis: To conduct a real estate market analysis is to perform a property analysis. The area and neighborhood, lot size, construction time, services and amenities, etc. should be evaluated.
- Evaluate the original price: Once you have performed the property analysis, search online for the original listing, if possible. This will give you a good idea of the overall condition of the home. Review the photos and descriptions for any updates, remodeling or potential problems.
- Verify property value estimates: Use online resources to give you the estimated market value of the home. Since these are market value estimates, they may not be totally accurate, especially if changes have been made to the home. But this will provide a good starting number to continue your real estate market research.
- Comparisons: Make a comparison of the property with others in the same area, aspects such as size, price and other elements will help you determine the value.
- Decide the market value: According to all your research, you should have a price range for the value of your property. Take into account everything you have observed and analyzed and how it will affect the value.
To conduct a study you can choose between two solutions: do market research on your own, or hire someone.
Steps to conduct a real estate market analysis
You need to take a structured and organized approach when conducting real estate market research. To do this, you can segment your analysis around these four axes: market, demand, supply and environment, and then you have to ask the right questions.
