Competitive Marketing Analysis - How Accurate Are They?

A competitive marketing analysis is a tool realtors use to help home sellers determine what their marketing price should be in today's current market. The good news is it's a free service; the not so good news is how accurate they might be.

When it's time to sell a home it's recommended that each home seller should interview several agents before choosing the best one. It's during the interview that the competitive marketing analysis is done.

Logically speaking, all of the Realtors will use the same database of information (MLS) when establishing a marketing price so you'd think it would be a straight forward process with all results pointing towards the same number. Unfortunately, this is not always the case resulting in inaccurate home prices and unusually long marketing times.

Let's investigate the two main reasons why the competitive marketing analysis provided by realtors might not be accurate.

BUYING A LISTING

The real estate industry is one of the most competitive industries in the nation. At this writing there are 1.2 million licensed realtors in America competing against each other for business. How does a realtor compete with so much competition?

They 'buy the listing', of course!

Suppose you interview three agents. The first and second agents say your home is worth $250,000 and $255,000 respectively and they show you evidence backing up their analysis.

However, the third one comes in brimming with confidence and says the first two realtors are absolutely crazy and at those numbers you'll be giving your home away. "I think your home will sell for at LEAST $275,000" and then provides new 'evidence'. (Important point: it's very easy for a realtor to manipulate data to JUSTIFY a price. A justified price does not equal what a buyer is willing to pay!)

Well, gosh, what's a home seller to do? It's a no-brainer. They will go with the realtor that said they could get the most. Who wouldn't? Over the next 30-60 days the realtor will encourage price reductions until it's at a value that interests potential buyers.

And that is what you call 'buying a listing'. It's when a realtor 'over values' the home in order to get the listing. The chances are extremely high that the competitive marketing analysis is not accurate at all. It wasn't meant to be. The goal of the realtor is to get the listing even if it meant stretching the numbers.

LACK OF KNOWLEDGE

According to the National Association of Realtors Member Profile 2009, forty two percent of all Realtors have been in the business for less than five years. Forty five percent of these rookies completed less than five transactions per year.

The bottom line is there is a very good chance the realtor you're interviewing has little to no experience in performing an accurate competitive marketing analysis. It's not that they don't care or have a good heart or want to do the best for you; they simply lack the knowledge to give real life accurate numbers.

IN CONCLUSION

Of course, not every realtor is inept at pricing homes. In many cases the realtor will suggest an accurate price only to have the home seller come up with a different suggestion. As the cliché goes, you can only lead a horse to water…

When interviewing agents the best way to get the most accurate value is to question everything the realtor says. Switch your thinking cap to a buyer instead of a seller. Play devils advocate with the realtor.

Don't just take their word for it. Challenge them. Question them. After all, it's still your home and you'll make the final decisions.