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Comparative Marketing Analysis in Real Estate

Instructor: Joanna Corneanu
In this lesson, we will examine the meaning of 'comparative marketing analysis' in real estate and discover how we can leverage this concept in real life.

What Is Comparative Marketing Analysis?

If you've ever bought or sold a house, you know how important it is to determine a fair price for the property. No buyer wants to pay more than fair market value and no seller wants to sell for less. So how do you figure out a house's value when every house is different?

In real estate, comparative marketing analysis is the evaluation of two or more similar real estate options by looking at a series of variables that have an impact on the property value. A real estate agent can perform a comparative marketing analysis, but you can also use comparative marketing analysis techniques yourself to estimate the value of a house.

Elements of Comparative Marketing Analysis in Real Estate

When performing comparative marketing analysis in real estate, you first need to look at a series of variables that may have an impact on the property price:

  • Area of interest
  • Time frame
  • Main features

Area of Interest

First, you would select the area of interest; the smaller the area, the more accurate the evaluation. A perfect example in this sense would be a ten-house community, where two houses are listed for sale, and four houses have been sold within the past year.

Of course, examples are not always perfect. If you're a buyer, identify the neighborhood you want to buy in. If you're a seller, you need to research your current neighborhood. Define the smallest area that you can find data on for current listings and sales in the past year.

Time Frame

Second, you would look at two or more properties that were sold in a given time frame. For example, to gain an accurate value representation, you would have to look at all the houses in the neighborhood that were sold during the past year. In the best case scenario mentioned previously, you would look at the four houses sold within the past year.

Main Features

Third, you would look at the main features of the four selected properties sold within the last year. The important aspect of this step is to focus on easily comparable features, such as: square footage, lot size, and number of bedrooms / bathrooms. The more similar the properties, the easier the evaluation will be.

For our example, let's say all 4 houses were built in 2008, however three out of the four houses have a total square footage of 1600 square feet and two bedrooms and two bathrooms. The fourth house in the group is significantly smaller, so it may not be relevant to consider in your evaluation.

After evaluating the quantitative features (square footage, lot size, number of bedrooms, etc.), you need to deep dive into more specific details such as renovations (e.g., new floors, eco-friendly windows, etc.) or additional features (e.g., parking garage, attic, security system, etc.). Even though three houses may have the same square footage and structure they may be significantly different when it comes to features and renovations, which can have a substantial impact on final price.

After you evaluate all of these details pertaining to the houses sold within the last year, you can go back to the two houses available for sale in the neighborhood and compare them against your three benchmark houses in terms of price and features.

Estimating Property Value

Now let's take a closer look at an example of how the comparative marketing analysis process works in real life. Jack and Jill are a newlywed couple in search of their first home. They are looking to purchase a two bedroom house on the east side of Charlotte, NC. After a couple of weeks of driving around the different neighborhoods, they decided to buy a house in the Oakhill neighborhood, which is a community of only six houses, all built in 2008.

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