Recently, there have been discussions about the ethics of agents who attempt to manipulate Days On Market in an attempt to remove stigma from a property. This discussion over on Active Rain really got me thinking, and I wanted to get the pulse of people’s feelings concerning this issue. Indulge me for a moment while I pontificate:
So what, exactly, does the tracking of DOM actually accomplish? Is it a tool that buyer’s agents use to determine value for their clients? If a home is on the market for 365 days, does it mean that the home is over-priced? Absolutely. However, let us say for the sake of discussion that you take a client to a home because they saw pictures of the listing on line, and thought it looked nice. So, you take them out to the listing, and they fall in love with the home. Now, as a professional agent, you have a duty to your clients to protect their interests. When they say to you that they love the property and want to write an offer, they are relying on your expertise to help them make a good decision. Would you advise them on what price to offer simply based on DOM? Of course not. In fact, to determine a good price for your clients to offer, would you take into consideration the DOM at all? You shouldn’t, as it has no relavance to the home’s value. To come up with an equitable offer, you would simply pull the comparable sold properties, and advise them of this. You would then advise them that the price you have suggested is what the property will likely appraise for, and that unless they want to pay part in cash, they should offer within this range. Paying any more would be unwise. However, an unwise person could pay whatever they want for a property if they have cash, they just need to sign a disclaimer that you advised them against it (someting I did repeatedly in the hot market of 04-05).
Now, can DOM stats help us to determine market trends? I would submit that they can, but that those numbers would be spurious anyway, because of agent’s manipulation of these numbers. There are much better methods to use to determine market trends, such as calculating absorbtion rates.
Bear with me as I put on my flame-retardant suit before giving my undoubtedly unpopular opinion. I think that, in the best interest of my clients, I need to be ethical with them. That means sharing the absolute truth about what their property could sell for. I also need to condition them to the idea that even though the price may be “right,” it may not be the price that someone is willing to pay. Now, if I take an expired listing, I am of the opinion that the 1st agent was either not exactly honest with the seller in order to get the listing (buying the listing), or that they were simply a weak agent, and caved to the seller’s demands. Either way, the agent failed on the job. Now then, should we punish the seller by publishing either their, or their former agent’s, ineptitude? I don’t think so. I am not advocating that anyone manipulate data, just that that particular piece of data is useless anyway.
Greg Swann says:
Hmm…
The liklihood that a home will sell tomorrow goes down with every day on market. If, in a market like ours at present, I have four very comparable homes that a buyer might buy, I’m going to use every fact I can obtain about the three ugly step-sisters to beat up the price of the ultimate Cinderella. DOM definitely enters into the calculations — since the seller wants the maximum attainable proceeds, not an unrealized ideal sum. The value of the home is not backward-looking but forward-looking: After 311 Days on Market, what are your future chances of getting an offer better than this? How much worse do your chances get if you chase my buyer to another home? Hard-ball cherry picking is a delicate game, but buyers rarely have this much leverage.
February 11, 2007 — 1:34 pm
James says:
In our M.L.S. this is really a moot point because an agent can always click on the M.L.S. history. Any manipulation of dom’s would be readily avaiable with just some simple arithmetic.
That being said, beauty is in the eye of the beholder, (this by no means diminishes a buyers agent of informing his or her clients of the facts). But, not every property is created equal regardless of the proximity to another, nor is every buying situation (i.e. parents, siblings, work needs etc.). So if the property appraises, or the buyer has the cash let them at it.
I have always felt that houses sell houses, not salespeople. I tell my buyers you cannot put a price on emotion, the home will pick you!
Thanks for letting me add my 2 cents (is that all I made on that commission)?
James
P.S. Great site
February 11, 2007 — 3:07 pm
Chris Lengquist says:
While DOM is another tool to use in your negotiations in the current market the bigger factor is the buyer’s attitude towards the DOM. If it’s not the second question out of most buyers’ mouths, it is the third. They all want to know DOM. They are weighing the price asked and ALWAYS comparing to what else they’ve seen. Rightly or wrongly, most buyers feel that with each passing day the asking price of a home should go down some mythical corresponding amount. It is there and it is real. Dismiss at your own risk.
February 11, 2007 — 3:49 pm
John says:
–clip–
Amazing. You’re a walking contradiction. Buyers should stay far away from you.
February 11, 2007 — 7:11 pm
Allen Butler says:
Although I don’t see the incongruity, I must absolutely agree with you. . .on both points.
February 11, 2007 — 7:31 pm
Jonathan Dalton says:
Excellent point, Allen, and one I’ve made repeatedly … the most recent is here after another Peter Coy jump into irrelevance.
What John above misses is DOM shouldn’t be taken into consideration when making an offer. The apparent market value of the home needs to be considered. DOM doesn’t determine market value – the market determines market value.
Seems like a simple argument for anyone willing to look into the realities of the situation.
February 11, 2007 — 7:33 pm
Elizabeth Weintraub says:
Would you advise them on what price to offer simply based on DOM? Of course not.
——
I might be odd guy out here, but I absolutely would advise my buyers, and I do, to submit offers based on DOM. That might be unfair in some agent’s and seller’s minds, but whoever said the real estate business was fair? I run the history in my MLS, and when I see a home that’s been on the market in my target neighborhood for more than 60 days, it’s like a red flag waving.
But then I’m also one of those agents who will tell her buyers if they are offering too much, because that’s in their best interest.
February 11, 2007 — 8:02 pm
NYCJoe says:
I don’t see the logic in not considering all the available information when making an offer.
Maybe you shouldn’t base an offer on DOM, but you should at least consider it, since it offers some insight into the position of the seller.
And besides, if DOM wasn’t important, then why play games with it? Why do some agents de-list a house and then re-list under a new MLS # in order to hide the DOM?
February 11, 2007 — 8:56 pm
Allen Butler says:
My point, Joe, exactly! The real point of DOM is to beat up a seller. I think it sets up an unfair inbalance in negotiations. I believe that it unfairly penalizes a seller. Who cares how long it’s been on the market. You either want it, or you don’t. DOM doesn’t determine value.
Suppose that a listing is drastically over-priced. Do you need for it to sit with no interest for 300 days to determine this? It’s overpriced, no matter how long it’s been on the market. A buyer’s agent, when advising on writing an offer has much more useful ways to determine an offering price than DOM.
February 11, 2007 — 9:45 pm
NYCJoe says:
I think we agree – I’m not suggesting that DOM determines value. It’s just one more indication into the mindset of the seller.
Of course you can tell that a house is overpriced without looking at the DOM. But DOM does tell you something about the seller’s attitude.
In any case, it shouldn’t be up to the listing agent to decide for me whether DOM is important. I should get to see the information for myself and then decide.
February 12, 2007 — 3:48 pm
Charleston real estate blog says:
Allen, there are 2 issues here, the title of your post is “DOM Trickery” and how agents attempt to manipulate the data, of course a simple click on history takes care of all that.
The real issue is how to advise your buyer on making an offer for the house. DOM will give you some insight as to whether to offer at the top, middle or bottom of the range that is established by doing the comps. In any market, good or bad, any additional information you can provide to your buyer adds value to your service.
There is usually a reason a house is on the market for a long time. If a house is on the market for nearly a year and your buyer loves it, you can still offer less as long as you don’t totally insult the seller and at worst, hope for a counter. Same house on the market for only a month and priced to sell, your offer is going to be much closer to asking price.
Bottom line, DOM matters.
February 12, 2007 — 4:13 pm
Allen Butler says:
Great post Charleston.
Seems that the only positive to reporting DOM is to beat up sellers. It certainly is a one-sided issue. Not a good enough reason to keep it around.
In the interest of full disclosure, I do not represent buyers at all. I guess if I was a buyer’s agent, I might feel differently!
Allen
February 12, 2007 — 5:32 pm
Charleston real estate blog says:
Allen, wear 2 hats here, listing agent is to get the highest possible price for the seller in the shortest possible time, buyer agent is to help client buy the most house for the least possible price.
If I could find out the seller was more motivated because of a divorce, facing foreclosure or going to jail or anything that would help me justify a lower offer on behalf of my client, it would help. While I’m not suggesting that kind of information be included in the MLS listing, DOM is a very revealing bit of data to a buyer agent.
I’m not talking about beating up a seller, simply representing the buyer.
February 13, 2007 — 6:09 am
NYCJoe says:
I don’t see how it has anything to do with “beating up sellers.” I doubt very much that the typical seller will be motivated by whatever their DOM is. If a seller wants to take an offer, they’ll take it. If they don’t, they won’t.
When I submit an offer to a seller I don’t include the DOM on my term sheet. I base the offer on the value of the house.
February 13, 2007 — 11:51 pm
Stephanie says:
I’m not extremely experienced (still learning), but after having this issue raised by a seller earlier this week at a listing appointment of her expired listing; and after reading the initial article and responding posts, it appears to me (a newbie) that the only use of DOM as a tool for a buyer’s agent would be to determine the motivation of the seller. It seems very basic… the longer a home doesn’t sell, the more motivated the seller SHOULD be, thus, willing to accept less than what they had originally desired. – OR –
(Theory): What if as of today’s date we have 54,233 homes on the market in an active, active with cont, and pending status (armls stats alone-does not include FSBO etc), and several hundreds of those sellers were not SERIOUS sellers, but popped in at the end of the “BIG BOOM” (not knowing the “frenzy” was over) in the hopes that their home would sell within days, after a bidding war, and for more than the list price just like their neighbor’s house, or their brother’s house?
In the above case scenario if sellers are not motivated by a true NEED to sell, but simply a curiosity to see if they could get more than their equity and thus “turn a profit”, the same as Joe and Sue down the street, then does the DOM mean anything? Do they actually care how long it takes to sell, or even whether they sell?
No matter how talented and experienced a listing agent is, we only have “so many” tools available to determine a seller’s motivation. If they want to make us believe that they are truly serious about selling, they can and will.
If the DOM is a true tool for a buyer’s agent (determining seller motivation/ desperation) the agent needs to know that each seller is serious about wanting to sell their home.. true? How is the buyer’s agent going to determine this? Ask the selling agent?
I wear both hats; listing and buyer’s agent: When I go on an expired listing appointment and I see a high DOM, I hope that the reason is their previous agent did not do their job well; however, As Alan indicated in his article, I also wonder if I am about to come face to face with sellers who will not cooperate with me as much as I would like about the pricing of their home or the showing condition.
When I have a buyer and I see a high DOM, yes, I hope that this means the sellers will be motivated enough to work with my buyers; however, I also wonder if they aren’t motivated at all! I wonder if they don’t care whether it sells. If they don’t truly care if the house sells, then no offer less than EXACTLY WHAT THEY WANT is going to be accepted.
I’m interested in your comments….
February 15, 2007 — 12:31 pm
Greg Swann says:
> the agent needs to know that each seller is serious about wanting to sell their home.. true? How is the buyer’s agent going to determine this?
You’re right about DOM in Phoenix right now. Many, many sellers are not truly motivated. The ones who are will give themselves away in dozens of ways, subtle and not-so-subtle.
February 15, 2007 — 1:32 pm