Why Average Days on Market Matter to Home Buyers
Relisting Homes to Show Zero Days on Market
One of the first things a buyer wants to know about a listing is how many days it's been on market. "Days on market" (DOM) is the number of days a listing is active in a multiple listing service before it enters into pending status. Pending status is when an offer has been accepted by the seller but the transaction hasn't yet closed.
The median was 29 days in 2017, according to the National Association of Realtors.
Half of all homes were on market longer than that and half were on market less.
Average Days on Market
Many agents refer to "average days on market," a number that's arrived at by adding all the days on market of each listing and dividing that 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.
Agents use the last 30 days to six months of sold listings. Let's say that six listings entered pending status in December. Three of those listings were on the market for five days, one was on the market for 21 days, and two were listed for 30 days before offers were accepted.
Add together all the days on market: 5 + 5 + 5 + 21 + 30 + 30. This equals 96 days. Divide 96 by six listings to determine 16 average days on market.
Why 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 individual listing?
If you're a buyer, it's the home you want that matters. If you're a seller whose home has been on the market for 17 days, you'll have fallen into the lower 50 percent of homes that sold over the previous month. Studies have shown that the longer a home is on the market, the less likely the owner is to get his asking price.
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 becoming desperate to sell because the home is still available.
Buyers also tend to believe that there might be something wrong with the home, a defect that caused other buyers to pass it up. This can preoccupy them when they view the property. That potential and perhaps imaginary defect is on their minds, even if it's subconscious.
Both of those assumptions can be wrong. A home can linger on the market for several reasons.
The common reason for extensive days on market is overpricing. In an effort to get the listing, the agent might have misled 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.
And 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 one of the worst seller's mistakes.
The Effect of the Market
Sellers can also get stuck on a price and they're willing to wait out the market until it catches up to what they want for their properties. It can take longer to sell a home in buyer's markets 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.
It's Unavailable or Unsuitable to Show
If the property is occupied by a tenant, it can sometimes be difficult to obtain an appointment from the tenant. There's nothing in the deal for him and he doesn't want the inconvenience. In most cases, homes with lockboxes are shown more often than those without.
Sometimes sellers put homes on the market before they're actually ready to let buyers see them. They might be finishing resale repairs or painting during the first 30 to 60 days of a listing. Yes, the property has been on market...but it hasn't been shown or it's shown poorly.
Some sellers think a buyer will abide by strict showing times such as 9 a.m. on Mondays or only 5 to 6 p.m. on Fridays.
Buyers tour homes according to their own schedules. If your home isn't available at the time the buyer wants to see it, they probably won't see it.
Issues With Agents
Buying agents are required to show all listings that a buyer expresses an interest in, but many agents avoid showing homes that don't pay the same commission as other competing properties. Often these homes are listed by discount brokers.
And if the home has just one photograph in MLS, buyers are likely to pass on the listing and look instead at homes that have multiple photographs.
Relisting to Reset Days on Market
A common practice among some real estate agents is to withdraw a listing from MLS after a certain number of days and relist it again 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's misleading. It's obviously not an accurate picture of the number of days on market. It's not unusual for a home to sell within five days after coming back on the market as a new listing after it was previously on the market for 60 to 90 days.
And sometimes listings expire. Many agents take a listing for 90 days and a new agent snaps up the listing as soon as the clock winds down. The new agent reaps the rewards of the first agent's hard work. If you're happy with your present agent, you might consider relisting with him.
Find 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 it. In either case, it's relatively easy for an experienced agent to determine the number of days on market. It's not always so easy for a buyer.
One way is to enter the address of the property into MLS to find duplicate, expired, or withdrawn listings. Some systems have changed the way listings are reported and will include cumulative days on market in the listing itself.
The internet is your friend. You can also enter the property address into a search engine such as Google or Yahoo in a variety of ways. All its previous online listings should pop up.
If you're working with a neighborhood specialist, she should have a fairly good idea whether the home has been listed before and for how long and by whom.
Real estate agents can't misrepresent a property so you might ask the listing agent directly. Do not ask how long the home has been on the market because there's wiggle room here. It might have been a price reduction so the agent will feel justified in telling you only the days on market at the new price. Ask if the listing has expired or if it's been withdrawn or canceled then relisted. Be specific.
Finally, inquire of neighbors. They know everything that goes on in their areas and they're almost always 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.