Real estate data can help agents better guide clients through the buying and selling process. But its proliferation has also given rise to some pitfalls for agents, creating more potential for agents to inadvertently mislead clients or dilute their level of service.
Speakers recently discussed the matter at a panel hosted by StreetEasy in New York City. Here are six ways they said real estate data can come up short for agents, buyers and sellers.
1. ‘Agent beware’: Real estate can be flat-out inaccurate.
Consumers have always benefited from respecting the adage “buyer beware.” Amid the explosion of real estate data, agents should pay heed to a derivative of the maxim, coined by Shaun Anders, a real estate agent at Douglas Elliman: “agent beware.”
Anders says he compares figures on the same metric from four different sources before deciding what statistics to present to clients.
“Don’t just trust one source. You have to check from multiple places,” he said.
2. Real estate data (often) doesn’t tell you ‘what’s happening now.’
Julia Hoagland, an agent at Compass, says she used to be a “data lemming,” taking real estate statistics as gospel. But she’s learned that “if a market is changing at all, the data that you’re analyzing is not actually happening today.”
You have to keep your ear to the ground to get a full picture of a market, she said. And “the art can inform the science that you use for analyzing” in certain situations, such as when there are no comparable sales to use for pricing a property, she said.
Greg Heym, chief economist at Terra Holdings LLC, noted that the latest closed home sales figures reflect offers that were negotiated three to six months ago.
3. Real estate data can be misleading.
Real estate data can also be altogether misleading.
Heym says that people tend to overestimate the importance of monthly or annual changes in home sales.
“We would have more sales if we had more inventory,” he said.
Another example of a potentially misleading figure: a median home price that factors in the prices of new-home sales.
Given all the new luxury apartments in New York City, factoring the prices of new-home sales into a median home price figure makes the market look more bubble-ish than it really is, he said.
4. Real estate data can distract from other factors that matter to clients.
Real estate data does not account for a buyer or seller’s outlook. For example, a drop in the stock market or price of oil can shake a client’s confidence and inspire them to change or be open to changing their buying or selling strategy, according to Heym.
“One thing comps [comparable home sales] can’t tell you is what people’s moods are or what’s affecting their decisions to buy or sell,” he said.
Hoagland also noted that “everyone wants a discount until they fall in love.”
She said she worked with a buyer for three years who insisted on always making offers 10 percent below the asking price of a home. But that changed when he found the home of his dreams.
“He said, ‘Give me the ask,” she said. “He said, ‘I don’t care’ (what the asking price is).”
5. Real estate data can overwhelm clients.
Real estate agents must carefully select what real estate data to present to clients. Barfing up statistics can hamstring buyers and sellers, rather than help them.
Ryan Serhant, an agent at Nest Seekers International, says he frequently sees agents “who don’t know what data to share … so they share everything.”
“Then the buyer is like, ‘I have no idea what to do now.”
Anders recommends using six data points to help sellers price their homes.
The first three aren’t publicly available. “You’ve got to be buddy, buddy to get those numbers,” he said. They are: comparable sales in a building, the active listings in a building, the sales contracts signed in a building.
You can get the second three from data aggregators: comparable sales in a neighborhood, active listings in a neighborhood and sale contracts signed in a neighborhood.
6. Real estate data doesn’t matter very much to some buyers
Particularly in markets with inventory shortages, some buyers care less about real estate data and more about beating the competition, Serhant said.
“They would want to look at comps but then they also wouldn’t want to lose something,” he said.
Others, he added, are just naturally much more inclined to buy with their hearts.
Anders said that first-time buyers tend to care more about statistics than repeat buyers because the home-buying process is all new to them. Repeat buyers, particularly high-net-worth individuals, tend to be more willing to trust in the judgment of their agent.
“They don’t have time for data, just as long at it’s reasonable and within their budget they’ll buy it,” he said of luxury buyers.