Some Homes Sell at Higher Prices Than Others for a Reason
When a property is listed and sold, its closing price is usually different from its original list price since it is challenging to set a list price, even for an experienced realtor. Besides physical features there are many other factors to be considered: location, supply and demand, how tough the buyer negotiates, etc. Applying text mining techniques, a new analysis from CoreLogic finds that properties with certain words in their listing comments sell for higher prices, on average, than those without such comments.
The CoreLogic analysis used more than half a million single-family transactions that were closed in the first half of 2017 across the county. Because the analysis is conducted at the national level we do not see nuances at the local-market level, but we do see which words can have an effect nationwide. Each of the properties analyzed had a public remarks comment from which word pairs were extracted and the resulting impact on list price analyzed. Price can vary significantly across different geographic areas, so geographic variation can mask the information contained in listing comments. In this research, geographic variation was controlled so in order to better understand the specific impact of words on closing prices relative to list prices.
Figure 1 uses a word cloud to illustrate the word pairs that have the biggest positive impact on closing prices. In the word cloud, larger font sizes represent a greater impact on closing price. One feature that stands out is “pane windows,” which could represent dual-pane windows or energy-efficient windows. Obviously, buyers consider future utility bills a top priority when searching for homes. It is not a surprise to see that “new construction” made the list. As a matter of fact, newly constructed homes are usually priced higher than existing homes. Other features like “quiet street,” “remodeled kitchen,” “natural light,” and “hardwood floors” were all favored by buyers, and properties with those features typically sold at a higher price. Anyone selling a home that has any of the features listed in Figure 1 should make sure to ask their listing agent to include these words and phrases in the public comments. “Large backyard” also had a positive impact on a home’s closing price, which is consistent with earlier CoreLogic analysis that Americans appreciate large outdoor spaces and will pursue them when possible. It is worthy noting that “paint” references appear multiple times in these top word pairs, including “exterior paint,” “new paint” and “interior paint.” Those selling homes should consider painting throughout since it is a relatively small investment that can lead to a higher sale price.
-  Closing price as a percentage of the original list price is modeled to control the geographic variation. In addition, physical attributes such as bedroom, bathroom and the property size are controlled.
-  Each pair of words has a coefficient in the regression result. The larger the coefficient, the bigger the word pair in each of the figures
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