How to save money when you buy a house – the Everydata way

Source: Wikipedia

Source: Wikipedia

You’ve decided it’s time to stop renting and own your home. But do you know the 3 questions that can save you money when you buy a house?

Which “comps” are being used? Oftentimes, real estate agents will run “comps,” or comparisons of houses in the area, to show you how much a house should cost. But, an agent who wants to justify a higher price for a house may cherry pick certain comps to show you. Make sure you’re looking at all the comparable houses in your neighborhood.

How accurate is the Zillow data? Many people use Zillow to negotiate the price of a home. As we explain in our book, Zillow gives a “Zestimate” that estimates the price of a house. But only half of these Zestimates in a neighborhood are within what they call their median error rate. For example, if you’re trying to buy a home with a Zestimate of $500,000, even if it’s one of the houses within a median error rate of 5 percent, that means it could be $25,000 more or less than the estimate. That’s a $50,000 range – which gives you a lot of negotiating room. And remember, only half of the homes are even within the median error rate – the rest are outside of this $50,000 range.

Is this a good time to buy a house? You tell your parents buying a home is a great investment since prices are up 180 percent. Your Dad says you’re making a huge mistake because housing prices are actually down nearly 20 percent? Who’s right? You both could be – it just depends how many months (or years) of data you’re looking at. Anytime you’re looking at historical data – as you are with home prices – consider the date range carefully.

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Barking Up The Wrong Tree

“The Data Says ‘Don't Hug the Dog!’ ” 

That was the headline on a Psychology Today article that's getting a ton of coverage in the press.

Should you believe it? Not exactly. Because the "data" was simply based on observations of 250 pictures of dogs—a fact that raises a lot of questions. For example: 

  • What breeds of dogs were studied?
  • Were they representative of all dogs?
  • Where did the photos come from?
  • Are people who post pictures of their dogs different than people who don't?
  • Is 250 dogs a large enough sample size?

Fortunately, the Washington Post and other media outlets have pointed out some of the flaws with the study. And, to be fair, much of the hype around this study appears to have come from the media outlets themselves; the author of the piece never claimed that it was a peer-reviewed study - only that he was collecting some data.

If there's one thing you'll learn from our book, it's to question where the data comes from. Should you hug your dog? Maybe, maybe not - but you should probably look for more scientific-based data if you want to make the right decision.

Tablet vs Paperback?

In our forthcoming book, Everydata, we very briefly address an interesting study from the University of Oregon that finds "People actually recall more information when they read a printed newspaper versus reading it online." Our purpose in raising the study was not to closely examine the underlying statistical methodology (though we might have something to say about the sample of 45 people) but to introduce the concept that how you receive your data can also effect how you interpret or retain it.

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