Days on market is irrelevant
March 3rd, 2008 - Categories: Buying a home in the Dothan area, Selling a home in the Dothan area
By: Charles Woodall
Managing Broker
http://www.dothanhomesearch.com
Buyers like to use a high number of days on market as a tool to eliminate a home from consideration, or as reasoning for a low ball offer. There has been some discussion around the web recently (here and here) about listing agents withdrawing a home from the MLS and immediately re-entering it to make it look like a new listing. I myself have been guilty of doing that in the past. However the time has come for us to educate buyers as to why days on the market is an irrelevant statistic. Let me begin by dispelling two myths.
“This home has been on the market for a long time. It has to be overpriced.”
At what point in time does it become overpriced? Sixty days? 120? If you are looking at two very similar houses, priced exactly the same, with the only difference being one has been on the market a week and the other for six months, are they both overpriced, or just the one that has been on the market longer? My point is that if it is overpriced, it is overpriced on day one of the listing. If you as a buyer are working with a competent real estate professional, they should be able to show you, even on day one, an analysis with a reasonable determination as to the market value of a property. If you are not working with an agent, then an appraisal can show you. Unless you are in a market with rapidly falling prices, the determined value will be the same, no matter how long the house has been on the market.
“This home has been on the market a long time. The seller must not be motivated to sell.”
Circumstances are different for every seller, and there are multiple reasons why a home that has been on the market for any length of time is still there. Fairly common in today’s market is a situation where a seller doesn’t have any leeway in their price and is selling at near what they paid. Another reason is they may have selected a poor listing agent. Take for example a listing that has been on the market for 150 days. There is no way to determine, just by looking at days on the market, whether a home is still on the market because the seller has refused to budge on their price because they don’t have to sell (read not motivated), or whether they are desperate to move but can’t negotiate on price because they owe more than they can sell it for.
What’s the lesson for buyers? Don’t judge a home by the number of days it has been on the market. Focus instead on price, location, and desirable amenities. Days on market can be a useful number for a seller to determine what a realistic time to sell will be, but it is of little or no value to a buyer.
EDIT: I inadvertently left out another post discussing this topic on Jim Duncan’s blog. An callous and unintentional oversight on my part.
Possibly Related Posts
- Days on market redux and the listing agent show
- Days on Market Analysis of the Dothan Real Estate Market - 3rd Quarter, 2007
- So if there are twice as many homes on the market, how long will it take to sell mine?
This entry was posted on Monday, March 3rd, 2008 at 2:08 pm and is filed under Buying a home in the Dothan area, Selling a home in the Dothan area. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
[…] Days on market is irrelevant, by Charles Woodall. […]
Unfortunately for most buyers DOM is a number that they can understand themselves. It is up to us to give them the right interpretation of what that number actually means. Since the average days on the market in our area is 3-4 month it makes no sense for agents to withdraw them every 30 days to make them appear “fresh” and pop up as new in saved searches. I agree it isn’t always a “overpriced” house or “unmotivated” seller. In this market sometimes it is just what I call the “is what it is” factor.
I have written about and commented about Days on Market many times before and I am very much an advocate for eliminating this “statistic” for several reasons, several of which you have mentioned. A couple of questions to keep in mind when thinking about this subject: Why do we even have Days on Market, no other non-perishable industry does? Why can’t we just put the date of listing and leave it at that? Are agents using days on market as a lazy way to determine value because they are too lazy to do their jobs? Are listing agents afraid that their fellow agents are too lazy to do their jobs and therefore feel they need to game the system? Is days on market manipulation just a symptom of a much bigger problem?
@Cindy - You are correct that it is up to us as real estate professionals to educate buyers on what, if anything, all these statistics mean.
@Tony - Thanks for commenting, and you are spot on about lazy agents.
[…] Charles Woodall of Dotham Home Search?suggests that “Days on Market are Irrelevant” and makes some good points. I have posted on this topic myself and think it’s a good topic of discussion with buyers, especially in areas that are in buyers market’s. […]
[…] Jim and I agree on the irrelevance of days on market as a statistic, although for different reasons. Withdrawing and re-listing a property (Jim’s beef) to reset days on market to zero skews the data. I have been guilty of doing this, as have most REALTORS, reasoning that sometimes a listing needs a fresh start. Yes, that is gaming the system and shouldn’t be allowed. However, if you read my earlier post on this subject, I have come to feel that days on market should not be relevant to a buyer anyway, regardless of whether it is accurate or not. […]