Statistics are a tool, and like all other tools, they can be used to help or inadvertently hurt you, especially in high profile purchases like in Edmonton's real estate market. As I discussed in a previous blog, I encourage my clients to use statistics to better get a feel for the price average in a community, to learn more about a community if they are from out of town, or as a tool in negotiating the price of a home. I also caution my clients in using statistics 'the wrong way'.
Here is a list of some of the ways that I have seen home buyers use real estate statistics to receive negative results:
- Using single sales instead of averages: Whenever possible, I try to present a buyer with the last 10 sales within a neighborhood or zone that are listed and/or have sold. With a sample size of 10 there is a general trend that will emerge as well as a few 'blips' at the top or the bottom of the price scale. Unfortunately these single extremes are used by buyers as their 'bottom line' for price. This rarely results in a successful transaction.
- Comparing apples to oranges: Buyers will sometimes send me an email with a comment such as "Look at this home 5 houses down from that place I liked. It just sold for $75000 less than what my place is offered for. Can we low ball them?". Unfortunately, what is often lost in these types of scenarios is that the house that went for less was 25% smaller, or a different style of home (1/2 duplex of townhome compared to a single family home), explaining why there was a gap in price. So make sure that you are comparing apples to apples!
- Using anecdotal statistics as gospel: Anecdotal statistics is an oxymoron; it doesn't actually exist. yet it is a very common . Whether its water cooler talk at work, chit chat at the kids' hockey game, or small talk over a beer with the boys, it seems that these 'stories' of amazing real estate deals where a buyer saved tons of money carry more weight than actually black and white facts.
- Using statistics as the most important factor in buying a home: I often state that buying real estate serves three functions: it serves as a security, it serves as an investment, and it serves as a lifestyle choice. What can happen is that home buyers focus too much on one of those areas: often it's the investment part. They want to make absolutely sure that they are going to get 'the best deal' based on the statistics provided to them. This ignores the lifestyle component. Inevitably, these buyers return to me a short time later, realizing that just looking at the numbers had caused them a lot of grief in the lifestyle department. Make sure that statistics alone are not the deciding factor on whether or not you buy a property. Balance is key!
Stay away from these real estate statistics pitfalls and it will increase your satisfaction with your home purchase!