Statistical Smoke Screens – Why agent sales stats can be deceptive…

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statistics or smoke screenIt’s been said that numbers don’t lie – or do they?  I love statistics.  Heck, I worked as a molecular biologist in mammalian genetics.   I defy anyone to find  a scientific discipline that is more reliant on solid statistical analysis than that!

But…. as anyone in the sciences will tell you – statistics are only as valid as the data they are measuring.   I saw more than my share of  deceptive creative  uses of statistical models.  In the science/engineering  disciplines “peer review” holds these “creative types” accountable and by and large it does an excellent job.  In fact this is often where the rubber meets the road for  most of the junk popular pseudo-scientists who whine that they can’t get published.

Sadly – I haven’t run into the real estate watch-dog equivalent of peer review.

Phil Faranda  wrote a  blog about REALTOR stats being open to the public. He sighted a post from Agent Genius about how when the Houston Association of Realtors started disclosing these stats – agent protest caused the program to be discontinued.

Part of me is tempted to like such disclosure.  On a positive note  – it certainly would throw a monkey wrench into people using Trulia and Zillow to become premier area “experts” so long as they are willing pull out the plastic.  Never mind that they may have nary a closing or listing in the zip code for over a year.

The critical question  that every home buyer/seller has to ask themselves when looking at all this number crunching is simple:  What do these stats tell me about this agent or this brokerages ability to sell my home or help my buy a home?

This may sound pretty easy – but its not.

How can the numbers be distorted – oh let me count the ways!

When I was getting my license and looking for brokerages I found to my surprise that they all claimed to be the #1 brokerage in the area.  The question was #1 for what?

  • One was #1 for listings…
  • One was #1 for the number  sales….
  • One was #1 for gross sales volume ($ amount)
  • One was #1 for the most  agents….
  • One was #1 for the number of branches….
  • And finally – One was #1 for finding creative ways to be #1 at SOMETHING…

All could have  earned an  A++ in Statistical BS 101.
They had used some much pretzel logic in their number crunching that I truly had to admire their ability to be deceptive creative use of numbers.

Last year Westchester Magazine published their definition of Westchester’s top agents.  It was based exclusively on gross sales volume.  I wrote a blog based on their stats regarding how we define “success in the real estate market. They ignored expired listings, cancellations, the fact that most of these people had large teams of agents working for them.  Their numbers were in effect – useless for the average seller looking for a listing agent or you typical buyer.

For individual agents – Statistics are your friend – if you massage the data –

“I have over 100 listings!” Friendly translation – I throw anything and everything against the wall to see what sticks.  Please don’t ask me about my sales stats.

“I have $15 million in gross sales!” Friendly Translation – I’ve done this over a 15 year period!  or I slept with someone and sold one property worth $15 million.

“I sold over 100 homes last year!” Friendly translation –  My BROKERAGE with 50 agents under  sold over 100 homes collectively.  Don’t ask how many agents it took to achieve that number.

“I personally sold 22 properties last year!” Friendly Translation – That’s what I sold but I’ve got about 80 listings littering the expired and cancelled list on the MLS.

Statistics are too easily distorted/misrepresented.   Also I note that on that post the people who were “all for it” were those for whom those particular stats would favor…hmmmm.  I bet if you looked “under the hood” at what the stats actually meant on an agent by agent basis – some of them wouldn’t look as good as they do on paper.

Further Reading:

Defining “success” in the real estate – or how not to choose a real estate agent

This Brokerage Has 750 Listings…..So they must be the best! (Part 1)

This Brokerage Has 750 Listings…..So they must be the best! (Part 2)

Mirror, mirror on the wall…who’s the fairest listing agent of all…Part 1:

Mirror, mirror on the wall…who’s the fairest listing agent of all…Part 2

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