The Truth About Statistics
“You can find a statistic to prove anything you want to prove.”
Ever heard that before? Hope you didn’t believe it, because the fact is that surveys and market data are incredibly valuable tools that people use to make business decisions every day. Yet, we know that people cook up studies and surveys every day to support their point of view.
The problem isn’t statistics. The problem is BAD statistics.
To wit: A Northwestern University study released earlier this month found that people in Madison, Wisconsin, who sold their homes through real estate agents typically did not get a higher sale price when an agent's commission is factored in, usually 5 percent or 6 percent, than those who used a local for-sale-by-owner site.
This study was reported widely in the press, and many stories challenged NAR’s data on unrepresented sellers. NAR’s latest Profile of Home Buyers and Sellers found that homeowners who used a professional sold their homes for 16 percent higher on average than those who did not.
Which is to be believed? Are local FSBO sites like the one in Madison going to revolutionize the industry? (Add them to the list that includes buyer rebates, minimal service firms, national aggregators, and virtual office Web sites.) Don’t hold your breath.
Several points:
1. ALL REAL ESTATE IS LOCAL. Madison is a wonderful city, but it is only a small slice of America. Making national conclusions based on the operations of a single Web site in Madison makes little sense.
2. QUANTITY IS QUALITY. In surveys, the larger and more representative your sample is, the more accurate your results will be. Most national surveys sample 1,000 people and have a margin of error of plus or minus 3 percent. NAR’s annual Profile starts with questionnaires mailed to 100,000 people who have either bought or sold property—or both—in the previous year. Of those, 3,000 to 4,000 typically are returned. That’s more than three times the national average.
3. CONSISTENCY IS COMPELLLING. NAR’s Profile has been asking the question about average sale price for the past several years. The number has actually been growing, which is not surprising since most of the nation is in a buyers’ market. Year-after-year consistency makes a very compelling case.
