Informational Thoughts
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We're DBAs, or developers, but in any case, if you're reading this, data probably has some meaning for you. I know it's often an abstract, and for many of us, the data that's in our databases has meaning for the company, but we don't really care what it is. We do often, however, care about how to retrieve it and many of us take the challenge of finding new and interesting ways to pull the information together so that it has more meaning for the end user.
I sometimes think that those that work in data mining and the BI space have a really cool job in developing new tools to analyze information. It's pretty neat to see and hear about people finding new trends in their data simply by running different types of queries.
So when I read this article in Wired about information and real estate, I was intrigued by the points being raised. For two reasons, one because I have an economic incentive to pay attention to this and two because the informational analysis of real estate transactions brought about the article.
I'm not sure how sales of land and houses work in other countries, but in the US, typically you find a real estate broker or agent when you look for a house to buy. This person should represent your interests and help you find houses, look at them, make an offer, and work your way through the process of acquiring the house. The agent receives a commission for doing this, which is based on the selling price of the house and is paid by the seller.
When you go to sell your house you hire an agent (it could be the same one who sold you your house and often is) and they "list" the property with a variety of services and do marketing, etc. They may or may not sell the house themselves, but they receive a commission either way. Again the seller pays and it's typically a 6% commission split between the listing agent and the selling agent.
Before I go further, let me tell you my Mother is an agent and so I've grown up my whole life with this process. Now she typically sells houses and doesn't list them unless someone asks her. Some agents work the other angle, trying to list more than they sell. The article, however, mines the data of housing sales, comparing the sales of houses, comparing the houses that agents list versus those that they own.
It's an interesting comparison and brings about a few questions. Since the agents tend to have their homes on the market longer and sell for a higher price, it tends to question the ethics of agents. While I'm sure there are agents that want to make a deal quicker to they can get paid, same as at every company, including probably yours, most agents I've worked with are pretty good at making sure you're happy with your purchase.
Whether you agree with the article or not, it's an interesting data mining experiment and one that's challenging. Comparing houses is hard since they're mostly unique. Two houses side by side may not be that close in value, I know the one next door to me is almost twice as expensive as mine. Then the timing of sales can alter the value dramatically. Two houses selling 8 months apart could have much different values even if everything else is the same. Views matter, being on the water, a little further from a major road or a school, corner lot, etc. The variables are incredible and if the figures are close to accurate in the article, someone really developed some great queries.
I think the questions being asked are interesting and if you need to buy or sell a house, be aware of them. These are not bad people, but they are sales people and they work on commission. That means they have a vested interest in getting you to make a decision. That's why you should always try to keep yourself in one position.
That of being able to walk away from any deal.
Steve Jones
Register for PASS with the "SSC" promotional code and play poker with the SSC staff.
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Interesting article,
i think there are two types of values for a house, the value of a house (eg bricks and mortar) plus the land its on (position, location, shape etc) , then there is the real estate agents view, which may or maynot be hyped based on the general direction of the market, but which takes into account the first value..plus its has to be commission based as outlined in the article as well.
definately need to be "caveat emptor" with houses!
At the end of the day the value of a house seems to be based on gut feel..IMHO
There are plenty of models out there that can analyse this sort of thing, sales based, location based etc
Im oz based as well, and the estate agents seem to be the same over here too
<edit> i work in building systems to do this sort of thing, and my main feeling is that you can usually get information to say anything you want it to....
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Life is far too important to be taken seriously -
In England (the laws are different in Scotland) the estate agents market our houses for us, but we have a lot more restrictions on their self interest which has to be clearly declared if they are selling their own property etc. They (and lawyers) are responsible for keeping prices high and pushing them up and up. Estate agents act for the vendor. The purchaser searches through their web sites and visits their shops then makes viewing appointments with them.
I'm going through the sale and purchase process and the agents were asking for 1.5% but quickly brought their rate down when another agreed 1.25% - that bit of dealing should save me about £2,000!
Too many properties are being put on the market at a high price solely on the agent's say so. In the end it is down to what someone will actually pay for the place. Over here it's a buyer's market at present with properties moving slowly. I'm about to put in an offer that is nearly 25% below the original asking price but reflects what I believe the place is worth with the work needed and comparing with other local properties. It's then up to the vendor to decide whether to take a real offer or trust estate agents hype and hold out! It is always worth negotiating - just be strong willed.
After years of data mining I believe statistics can be made to say anything required so it's always better to do your own analysis whatever the subject.
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"You have to know
when to hold em
when to fold em
when to walk away
and when to run...."
Tables I would use to calculate patterns of pricing:
house.var.local
house.var.regional
house.var.global
house.price.min.max
Add or subtract listing % price from a postive or negative end amount from the sum squared of each 'hit' of each variable found in the above var tables measured either as a positive or negative result and but first square rooting the end result.
Or just ask ten to fifteen percent more than the houses that sold near you posted as, and throw in the fridge.
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