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It Pays to Know Your Numbers

know your numbers
Keep your finger on the pulse of the market and serve buyers and sellers by knowing your market statistics. Here’s how.

Bryan Halda starts every morning by reviewing the latest Multiple Listing Service (MLS) statistics for his local markets in the Miami area. He looks for new listings, and carefully tracks closed and pending sales and the average time it takes to sell a home or condominium.

“Having the numbers at my fingertips really gives me an advantage in talking to buyers and sellers about the market,” says Halda, senior partner with Gray & Associates in Miami. That time spent gathering and analyzing the facts helped Halda generate more than $14.5 million in residential listings in the first three months of 2007.

Like many successful Florida real estate professionals, Halda recognizes the importance of using market statistics to grow his business. And national training experts agree that the time invested in doing this homework can pay off in a big way.

“While it’s always important to know the numbers, it’s even more important when the market is going through a transition,” says Laurie Moore-Moore, founder and CEO of The Institute for Luxury Home Marketing in Dallas. “If you’re truly going to be an expert and provide good advice to buyers and sellers, you need to know what’s going on—and the real evidence comes from the statistics.”

Moore-Moore says becoming a numbers expert begins with obtaining and analyzing the latest MLS statistics. But that’s just the start.

It’s also essential to look at the historical data in order to understand where the market has been—and where it might be going.

“You want to sit down and think about what numbers are most important to your business, such as pricing, sales, inventory and days on market,” she says. [See “Numerology” on page 33.] Next, you should go back to a benchmark date—perhaps one, two or three years earlier—and get those historical statistics. Finally, look at the same numbers for the last 90 days and for the most recent month. That will give you the most recent snapshot of your market.

“It’s all part of educating and informing the customer,” says national training consultant Bill Barrett, president of Bill Barrett Seminars in Orlando. “You must show them the trends, and let them come to their own conclusions.”

Neighborhood Numbers
While sales statistics and pricing averages for a broad MLS market area are always helpful, many Florida sales professionals find they need more detailed information on specific neighborhoods, pricing segments and types of residential properties.

Annette Bohannon, broker-associate in Coldwell Banker’s New Tampa office, tracks the MLS numbers on a variety of levels: region, city, ZIP code, neighborhood and subdivision. “We try to get a complete picture of what people are buying and what’s going on the market,” she says.

After gathering the most current information, Bohannon uses both her Top Producer and her Trendgraphics software to convert those spreadsheet numbers into charts and graphs that tell the story more clearly to buyers and sellers.

“Because every market area is different, it’s very helpful to be able to show a potential seller how many closed sales, pending sales and active listings there are in that neighborhood,” says Bohannon. “When we bring that kind of report to a listing appointment, it shows the seller that we know the market—and gives them a good reason to list with us. We’ve been using this system for several years, and the sellers really love it.”

Another believer in the power of knowing the local market statistics is Kim Case, an associate in John R. Wood’s downtown Naples office. “Many clients tell me they read in the national papers that homes in Naples are overpriced,” she says. “But what those stories don’t say is that Collier County consists of a myriad of different neighborhoods, each offering different things to buyers.”

By having the local statistics available, Case can point out those “micro-market” differences that matter to buyers and sellers. In the Moorings submarket of Naples, for example, there were five homes priced below $1 million last fall and more than 50 homes priced below $1 million as of mid-April. “If a buyer or seller asks about that market, I have solid statistics to offer rather than just an opinion,” she says.
But Case adds that there can be a risk in overloading a client or customer with too many numbers. “You have to be careful, because not everyone wants to know everything,” she says. “You have to tailor the statistics to what will interest them or use the numbers to answer the questions people think are important.”

To avoid overloading clients and customers with numbers, Case doesn’t track the broad demographic, economic or school system statistics, although she does include an overview of Naples for out-of-town customers and keeps current with local news. “For buyers who have children in school, for instance, I give them the Internet site for Naples schools and let them contact the principal or counselors directly and ask their own questions,” she says.

Building Your Listings
Knowing exactly what homes are moving in your market helps Florida sales professionals gain new listings, says Steve Neuman, a broker in Watson Realty’s Clermont office in Central Florida. “You always have to know your numbers, no matter what’s going on,” he says. “That information lets you adjust your tactics and strategies to market trends.”

Neuman says an analysis of MLS statistics shows that homes in the Lake County $200,000 to $300,000 segment of the market are moving the fastest. Therefore, his office is trying to increase its listings in that category. “We all love the $500,000 listings, but in our market there’s a 40-month inventory of those higher-priced homes,” he says. “So we try to be sure our office inventory has a good selection of homes in the segments that are more likely to sell more quickly.”

Building inventory in the faster-selling price bands helps Neuman’s office maintain a strong sales volume. And that strategy helps sales associates obtain additional listings. As he says, “Being able to show a home-owner that 65 percent of our listings are selling versus less than 50 percent countywide, for instance, helps build a strong case for our team.”

Neuman believes all Florida sales associates can benefit from knowing these types of market statistics, especially when they can compare marketwide or countywide averages with their own personal performance. “Agents whose personal numbers are better than average can use that data to generate new business with buyers and sellers,” he says, “and those whose numbers are below average can look at what they may be doing wrong and see how they can get those numbers up.”

Serving the Luxury Segment
For real estate professionals active in Florida’s luxury home segment, there’s no substitute for a detailed analysis of pricing trends and sales volume, according to Moore-Moore.

She recommends that sales associates break their statistics on the luxury market (defined as the top 10 percent of all sales) into logical price ranges: perhaps $750,000 to $1 million and $1 million to $1.5 million. After selecting a time period to analyze—30 days, 90 days, 12 months or all three—the associate can gather the basic information for each price range. That includes the number of properties sold and closed, pending sales, average days on market, list-to-sale-price ratio and number of expired listings.

This detailed breakdown is essential in the luxury home market, Moore-Moore says, because there’s a much smaller pool of potential buyers. “When working with a seller, you can update them with the number of real buyers, as represented by closed transactions, in their price range,” she adds. “Knowing the activity level in that price segment helps the seller make informed decisions on whether to lower the price or hold firm.”

For example, let’s say a seller wants to list her Sarasota residence at $760,000, but the sales professional thinks the list price should be somewhat lower. Moore-Moore says a professional who knows the numbers can tell the seller, “I’ve checked the statistics for the last six months, and there have been 12 real buyers per month in the price range where you would like to list your property. However, there have been 27 buyers per month in the price range under $750,000. That means we have a much better chance of selling your home by listing it just under $750,000.”

Knowing the level of sales activity also helps sellers understand why it may take longer than a year to sell a premium-priced property and why an associate might want an 18-month listing contract.

“Gathering statistics takes time, but in the luxury market it’s essential,” says Moore-Moore. “Most of the buyers and sellers are bottom line–oriented businesspeople who pay attention to relevant numbers in their businesses and expect you to have the important market stats at your fingertips to share with them.”

Working with Buyers
Successful Florida sales associates recognize that buyers like to see the same market statistics as sellers. If a local market has a high inventory for instance, Barrett says buyers can tour more properties, select the most appealing home and negotiate from a position of strength.

“An associate who’s analyzed pricing trends is also in a good position to reassure a reluctant buyer [that] now may be the right time to complete the purchase,” he adds.

Like sellers, buyers need to be educated, says Neuman. “There may be a wide selection of homes for buyers, but not every seller will accept a low offer on the property.”  In the Clermont market, the list-to-sale price ratio has been about 96 percent, Neuman says. “We tell buyers that no matter what they may have heard, properties are still selling for close to the asking price. The good news [for buyers] is that homes are $25,000 to $30,000 less than they were two years ago.”

And regardless of what overall market statistics say, it’s vital to look at the statistics connected with a buyer’s desired property, adds Halda.  “If a home has been on the market for two years, and there’s been a steady decrease in pricing, the seller may be anxious to sell.”

When presenting a purchase offer, Moore-Moore says, knowing the number of recent closed sales in that price range provides another negotiating advantage. “It’s one thing to present a contract,” she says. “It’s very different to tell the seller or listing agent that there were only 10 real buyers in this price range in the last month. This buyer is qualified, likes the house and is ready to purchase. With so few buyers out there, doesn’t it make sense to do this deal?”

Using Market Knowledge
For real estate professionals, understanding the market numbers can open the door to speaking engagements and new types of business.

For instance, Moore-Moore tells how one sales professional conducted a complete analysis of the luxury market in her Sun Belt city and then called a builder who had announced plans for a new subdivision. “After she showed him the recent sales and pricing trends,” says Moore-Moore, “the builder changed his strategy and began constructing homes in a different section of town—and he gave her all of his new-home listings.”  

Richard Westlund is a Miami-based freelance writer.