Why Average Days on Market Matter to Home Buyers
Relisting Homes to Show Zero Days on Market
One of the first things a buyer asks about a listing is its days on market. Days on market is the number of days a listing is active in a multiple listing service before it is entered into "pending" status. Pending status is when an offer has been accepted by the seller but the transaction is not yet closed. Many agents refer to "average days on market," which is derived by adding all the days on market of each listing and dividing by the number of listings.
In a buyer's market, the DOM are generally higher because inventory takes longer to sell. In a seller's market, the DOM are fewer.
Days on market matter. To determine the average days on market, agents take the last 30 days to six months of sold listings, add together the days on market (before each listing went pending) and divide that total by the number of listings.
For example, if six listings entered pending status in December -- meaning the seller accepted a buyer's offer but it has not yet closed -- and three of those listings were on the market for five days, one listing was on the market for 21 days and two were listed for 30 days before an offer was accepted, first add together all the days on market. The average days on market for December, in this example, is derived by adding 5 + 5 + 5 + 21 + 30 + 30, which equals 96 days. Then dividing 96 by six listings will equal 16 average days on market.
Do Average Days on Market Matter?
Which is more important? The 16 average days on market or the number of days on market of each listing? If you're a buyer, of course, it's the home you want to buy that matters. If you're a seller whose home has been on the market for 17 days, you will have fallen into the lower 50% of homes that sold over the previous month.
How Buyers Look at Days on Market
There are no ifs, ands or buts about it. When buyers see extensive days on market, they figure the seller is desperate to sell because the home is still on the market. Buyers also believe there might be something wrong with the home that caused other buyers to pass it up. Both of those assumptions, however, can be wrong.
Homes can linger on the market for the following reasons:
- The common reason is overpricing.
The agent may have "bought" the listing by misleading the seller into believing the home was worth more than the market will bear. It's not unusual for an agent to deliberately take an overpriced listing.
- Little seller motivation.
Sometimes sellers want to "test the market" by pricing too high, just to see if they can find a fool to pay that price. It's known as a seller's worst mistake.
Sellers could be stuck on the price and willing to wait out the market until the market catches up to the asking price.
- Down real estate market.
In buyer's markets, it can take longer to sell a home than in seller's markets. A home that would sell in five days in a seller's market might sell in 90 days in a down real estate market.
- Unavailable to show.
If the property is tenant occupied, it might be difficult to obtain an appointment from the tenant. In most cases, homes with a lockbox get shown more often than those without.
- Unsuitable to show.
Sometimes sellers put homes on the market before they are ready to let buyers see it. They might be finishing resale repairs or painting during the first 30 to 60 days of a listing.
- Reduced showing times.
Some sellers think a buyer will abide by strict showing times such as 9 AM on Monday or only 5 to 6 PM on Friday. Buyers tour homes according to their own schedules. If your home is not available at the time the buyer wants to see it, they will probably never see it
- Reduced commission.
- Although buying agents are required to show all listings, many agents refuse to show homes that don't pay the same commission as competing homes. Often these homes are listed by discount brokers.
- Little Internet or MLS exposure.
If the home has one photograph in MLS, buyers are likely to pass on the listing and instead choose homes to see that have multiple photographs.
Agent Practice of Relisting to Reset Days on Market
A common practice among many real estate agents is to withdraw a listing from MLS after a certain number of days and relist it as a new listing. Agents relist to show zero days on market because they know that buyers gravitate toward new listings.
Many buyers dislike this practice because they feel it is misleading and not an accurate picture of the number of days on market. After a home is on the market for 60 to 90 days, it is not unusual for it to sell within five days after coming back on the market as a new listing.
Sometimes listings expire. Many agents take a listing for 90 days and when the listing expires, a new agent snaps up the listing and reaps the rewards of the first agent's hard work. If you're happy with your present agent, you might consider relisting with your existing agent.
Finding Out the Cumulative Days on Market
Some MLS systems refuse to let agents withdraw a listing and enter it as a new listing without first canceling or expiring the listing. In either case, it is relatively easy for an agent to determine the number of days on market; it's not so easy for a buyer.
- Check Listing History.
One way is to enter the address of the property into MLS to find duplicate, expired or withdrawn listings. In the Sacramento MLS, this is known as pulling the "history" of the property.
- Look for Cumulative DOM.
Some MLS have changed the way listings are reported and will include cumulative days on market in the listing itself.
- Ask Your Agent.
If you are working with a neighborhood specialist, your agent will have a fairly good idea if the home has been listed before, for how long and by whom.
- Ask the Listing Agent.
Since real estate agents cannot misrepresent a property, you might ask the listing agent a direct question. Do not ask how long the home has been on the market because there might have been a price reduction, so the agent will feel justified in telling you the days on market at the new price. Ask if it has expired / withdrawn / canceled and then relisted. Be specific.
- Search Online.
Enter the property address several different ways into a search engine such as Google or Yahoo. All of its previous online listings should pop up.
- Ask Neighbors.
Neighbors know everything that goes on in their area and often are more than happy to tell you how long a home has been on the market.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.