Imagine, if you will. You are about to put your house on the market and start the search for your next, bigger home in a more expensive neighborhood. Your initial plan was to list your home at a high price and see what happens. However, your agent advises against this, saying you will start to accumulate days on market. Is this something you should worry about as a seller? Since you will also be buying, should you be looking at those days on market? Who cares about ‘days on market?’ I’ll explain.
Do Days on Market for Homes Matter?
Yes, in the world of real estate, days on market matter. It matters to buyers, sellers, and to anyone evaluating a property, a particular market, or the real estate market in general.
What Exactly Is Days on Market?
‘Days on Market’ or DOM is sometimes referred to as ADOM for ‘Active Days on Market.’ The Californian Regional Multiple Listing Service now calls DOM for ‘Days Active in MLS.’
By any name, DOM is calculated by adding up the days a property’s status shows as active in the MLS. Once the agent changes the status to show that it is under contract, then the days quit accumulating. If the property falls out of escrow and goes back on the market, then the days start adding back on again.
When a property closes, the DOM is permanently recorded, showing how long it took to get the property under contract. This statistic does not count the time the property was under contract with a buyer or in escrow.
- Cumulative Days on Market or CDOM/CDAM – This is the total time a property has been listed for sale. If a listing expires, gets cancelled, or withdraws and is relisted with the same or different agent, the days on market will reset, but the cumulative DOM keeps accumulating.
The only way to have everything reset is to take the property off the market and out of the MLS for at least 90 days. Of course, the entire history is permanently recorded in the MLS.
Why Should a Seller Care About Days on Market?
Sellers need to care about the DOM because buyers look at it. Put yourself in the buyer’s shoes. Would you view a listing differently that has been on the market 5 days than one that has been on 50 days or 150 days? Of course, you would.
In some markets, 30 days is a long time, while 90 days may be a short time in other markets. Every seller should be aware of what the typical marketing time is in their market, and they should keep track of how long their property has been for sale.
How Do Days on Market Affect the Seller?
The time a property sets on the market will affect decisions regarding how you approach the sale, especially regarding pricing. Days on Market can also influence negotiations.
Knowing that the DOM is being tracked can make a difference in how you price a property. Pricing it competitively will create a sense of urgency that helps move a property. If your property is not selling, you may want to do a price reduction before accumulating too many days on market.
If you get an offer and you are new to the market, you are in a better position to stick closer to your listing price. The longer you sit on the market, the more buyers will try to negotiate. Of course, a lot will depend on the market and asking price.
What Can the Seller Do About Days on Market?
The first and most important thing you must do is be aware of the days on market.
If you find yourself accumulating DOM, look at pricing, condition, accessibility, marketing, and responsiveness to figure out why your property is not selling. Is it a slow market? Are other properties selling? You need to make an assessment and, if possible, make the necessary adjustments.
Sometimes you must test the market. It is important to realize that not every property sells fast. Sometimes you must find your way, and sometimes it takes buyers a little longer to find you. You should be working with a knowledgeable agent whom you trust and have an honest conversation them.
Changing agents will not refresh the DOM and isn’t any different than relisting with the same agent. If you change agents, it should be because of the job you feel they are doing, not because of any perceived advantage you may mistakenly feel you’re getting in the MLS.
Occasionally, the best thing you can do is completely go off the market, take a rest, and start over. Just remember that you need to be fully out of the MLS for at least 90 days to get a fresh start with Cumulative Days on Market, and know that your MLS history is public record.
How Can Buyers Use Days on Market to Their Advantage?
Days on Market can give buyers some insight as to what the seller may be willing to do. If a property has only been on the market 3 days, then it is unlikely that a seller will come very far off their asking price. If a property has been up for 100 days, they might be willing to negotiate.
When a property is new to the market, there will be more eyes on it. Newer listings will get more attention and carry a greater sense of urgency. New listings are less likely to negotiate price.
Don’t overlook properties that have been sitting on the market for a while. Some of the best deals are gotten on properties with high days on market. These properties can get overlooked. Plus, price reductions don’t reset the DOM. Look at the pricing history and be familiar with property values.
Smart buyers know that price is way more important than DOM.
What Can Days on Market Tell You About Real Estate Markets?
Economists, savvy real estate investors, and wise advisors will use Median Days on Market when evaluating real estate markets.
- Low Median DOM – Low and shrinking DOMs show faster sales, high buyer demand, potentially increasing prices, and indicate a seller’s market.
- High Median DOM – High and increasing DOM show slower sales, low buyer demand, potentially decreasing prices, and indicate a buyer’s market.
Part of the beauty of this statistic is in its simplicity. It is easy to get and easy to understand. Most agents can obtain DOM using the MLS and can do so for a specific neighborhood, making it much more relevant than the typical national statistic used by economists.
If you are going to run the numbers, use Median instead of Average since it is less likely to be distorted by the extreme outliers.
Bottom Line
In real estate, Days on Market (DOM) matter. The CRMLS here in California now, perhaps fittingly, calls it DAM for 'Days Active in MLS.' Regardless of the name, it indicates the number of days the status of a home shows as active in the MLS. If the property comes out of the MLS and gets listed again, the DOM gets added to the Cumulative Days on Market (CDOM). The only way to reset the days is to have the property completely out of the MLS for at least 90 days.
Sellers need to be careful about the DOM because it is something that buyers watch. DOM can factor into what asking price a seller chooses and negotiation strategies. Sellers need to pay attention to the DOM, but sometimes days will still accumulate. Not every property sells quickly.
Buyers can get insight as to the likelihood of a seller negotiating price by paying attention to DOM Listings that are new to the market, get more attention, and are less likely to negotiate. Properties with high DOM can often be a good deal, but they might just be overpriced. Buyers should look at the pricing history, know values, and focus on the big picture.
DOM is often used statically for professionals evaluating real estate markets, so you might as well make it work for you.
Thank You
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