In the real estate game, many buyers understand that knowing a home’s days on market (DOM) is absolutely critical intel. Why? Because the number of days a home spends on the market directly affects the price of a home. Plus, this information can be used to the buyer’s benefit to negotiate a lower price. Here’s how!
What does ‘days on market’ mean?
“‘Days on market’ is the number of days that a property has been listed on the local multiple listing services (MLS) until a seller has accepted an offer and signed a contract,” says Ryan Substad, a real estate investor and owner of NorthWestPropertySolutions.com. It can also be referred to as “time on market” or “market time.”
When browsing home listings, buyers should always take a look at the number of days on market to determine how other buyers are reacting to the property.
“A house that has only been on the market a few days typically means that home could go at the asking price or higher,” says Valerie Burmester, a real estate broker with Marketplace Sotheby’s International Realty in Redmond, WA. “But a home that has been on the market for a longer period of time, say 187 days, is likely overpriced in most markets.”
This is usually a sign the seller seriously misread the market.
How buyers can use DOM to their advantage
While a high DOM can be a sign to buyers that something is wrong with the house, it can also indicate a potential bargain.
“Buyers and their agents can use days on market as a search filter to identify homes that have been listed for a long time,”says Brian Davis, a real estate investor, landlord, and co-founder atSparkRental.com.
While DOM can indicate sellers who are refusing to budge on their asking price, it can also identify sellers who haven’t received offers and who may be open to a dramatically lower offer. Because the last thing sellers want is for their house to get stale on the market.
“A home with a high DOM tends to get overlooked becaus eit becomes the ‘rotten banana,'” says Burmester. “It could be a beautiful home that was just overpriced from the start, but after weeks or months on the market, everyone wonders, ‘What is wrong with this house?'” And that perception can be difficult to recover from.
How to decide what to offer using DOM
Generally speaking, the longer a house is on the market, the more there’s the potential for buyers to score a great deal.
“Depending on the market, a home that’s been on the market for a long time begs for negotiation in a real estate agent’s mind,” says Burmester.
Buyers and their agents can often learn more about the seller’s urgency to sell by calling the property’s listing agent.
“Ask probing questions about why the property has sat so long on the market,” says Bryan Stoddard of HomewaresInsider.com.
Also feel out the seller’s openness to lower offers. While listing agents can’t violate their fiduciary responsibility to their sellers, you can usually gauge a seller’s openness to lower offers based on how the listing agent responds.
You can then arrive at an offer with your agent by researching recent comparable sales.
Days on market loopholes
In certain markets, a listing’s days on market can actually reset. For example, in New York, if a listing is taken down for 90 consecutive days, the clock goes back to zero days on market when it’s relisted. The same generally happens if a new agent takes over the listing.
Be sure to ask your agent to do a deep dive on a listing’s full history so you will know exactly how long the home has been for sale.
What sellers need to know about DOM
An overpriced home can be the result of sellers who think their house is the best in the neighborhood and won’t deviate from that idea, no matter what.
“Some sellers don’t understand that buyers set the market numbers,” adds Burmester.You can figure out your home valuation by entering your address into an online home value estimator, which will give you a free evaluation of what your home is worth, based on recent home sales in the area, among other things. But that’s just a starting point—remain objective and talk in-depth with your agent to avoid a high DOM.