Days on the Market: What do they mean?

As with many things in life, Real Estate has its own language, often expressed in acronyms (DOM) or words that most “normal” people do not use regularly (contingency). Ideally this language enables agents to communicate meaningful concepts more quickly although I often find that fellow agents do not have the same “understanding” that I have and that many agents use these terms with the public without explaining what they really mean.  DOM is one such term.

Days On the Market technically shows how many calendar days a house has been available for sale without being sold.  Ok, so that means what?  In theory it should have some relevance as far as how saleable a house is:  higher DOM seems to indicate a problem with a house.  I have blogged on this subject before, expressing my opinion that an unsold house typically indicates a problem with marketing (can consumers and agents actually find a house in their searches?  If not, DOM may not reflect a price issue) OR pricing (can consumers buy what you have for less of their hard-earned money or can they acquire a better location/ more features/ better condition at the same price?).

The problem is that DOM can easily be manipulated and that may be a violation of Article 1 of the Realtor Code of Ethics because doing so distorts a statistic that many rely on when evaluating properties.  Simply stated:  it is clearly dishonest.  Please read my articles on the Code of Ethics and Professional Standards.

Manipulated how?  Let me list a few ways:

• in  the old days some agents would constantly withdraw and re-list houses as if they were “fresh”.  Some still do this but to a lesser extent than in the past.  People who paid attention knew what was happening and any good agent would review the property history if they had an interested client. Unfortunately, many agents do not do this;
• some agents misuse/ abuse the property status indicator to suppress the DOM or to hide activity such as when a property is under contract.  The rationale:  should a sale fall through, no one will know what happened so they will not inquire, possibly avoiding needing to disclose “material” information that might dampen interest;
• some agents withdraw and relist a property and then quickly change the status to reflect a sale.  The only reason I can imagine that someone would do this is to make it look like they sold a house quickly so they can falsely brag about that.

My MLS, Trend/ Bright, created a way to minimize DOM manipulation.  While it is not perfect, the PMP (Property Marketing Period) does continue to accumulate unless a property is taken off the active market for at least 30 consecutive days.  Here is an example:

• two properties enter the market on January 1.  They both expire unsold (this means that term of the listing contract ran out/ expired before a property is sold, leaving the seller options as far as what to do next) on June 30 showing 181 DOM.  One seller decides to hire a new agent and put their house back-on-the-market on July 1, starting with a refreshed 1 DOM but with a 182-day PMP.  The other seller is told to wait 30 days to reset the PMP so they put their house back on the market on August 1, showing 1 DOM and a 1-day PMP.  Is there really a difference?  If July was slow as far as Real Estate sales, does the added PMP really indicate a problem with the house?

I work with many sellers who had their properties on the market previously with another agent who did not sell it.  More and more of them seem to understand the PMP calculation and ask me if I think they should wait to put their house back on the market.  I tell them that any good agent will look at the property history and quickly see what happened so waiting to re-list will not fool many people.  More importantly, while I do not think there is a possible Code of Ethics violation in waiting (there is no actual manipulation), I question why a serious seller would forfeit 30 days of activity?  While this may not matter during off-peak times, it makes no sense if the time of year is conducive to activity and the simple fact is that (here is one of my Real Estate truths!), while I cannot guarantee that I can sell your house if it is on the market, I am fairly confident that it will NOT sell if it is off the market.  There are times where I suggest “taking a break”, especially if a house needs some attention or if the seller needs a mental break.

In conclusion, DOM is what it is.  It is a tool but it is not perfect!  Serious sellers and buyers need more than acronyms and Real Estate terminology to make smart decisions.  They need a real, live professional to help them navigate the too-often confusing flood of information, both good and bad.  Good agents will look at the history and provide professional advice to their clients.  Frankly, I am more interested at the pricing history than how long a house has remained on the market, especially if I see that the marketing failed.  For example, I met a seller this week whose property listing recently expired.  The MLS (Multiple Listing Service) information described his house as offering 4 bedrooms and a 1-car garage.  There were other concerns but these were the most glaring.  The house actually has 5 bedrooms and a 2-car garage!  I can only wonder how many possible buyers never even knew that the house was available for sale?  Sadly, the agent requested and was given price reductions when the marketing was clearly poor!

As far as the history, a house that goes from agent-to-agent-to-agent with little to no change in price may indicate a seller attached to an unreasonable price and that may suggest that they have a low level of urgency.  If you have a buyer whose house is under contract, can they risk getting involved with a “low urgency” seller, given that they need a place to live in a few weeks?

HIRE WISELY!