There’s always something to howl about.

Days On Market? It is a stupid question and a stupid answer

The obsession to keep the Days On Market (DOM) “accurate” is just one example of a misevaluation of relative importances. Our local MLS, Arizona Regional Multiple Listing Service (ARMLS) fixed up the system so it would show the “true days on market”. If a property had been listed before then the Cumulative Days On Market would show up on a one-line printing of listings and on a full print-out. The agent days on market is also shown, but each and every listing shows the “cumulative” DOM and one can even do a search of the MLS based on the DOM. Any days on market with another company or another agents in the past 90 days shows up in the cumulative number (CDOM). This fabulous benefit to “tranparancy” is now common in many Realtor multiple listing systems around the country. There are articles in the press about how agents have “tricked” the buying public by canceling and listing the same house again, giving it a new MLS number – and thus resetting the DOM number to zero.

Setting aside that I am a listing agent and the fact that the seller ultimately pays the commission that the buyer agent collects (in Arizona, the listing agent pays it, with money he or she has collected from the seller) – why do I think CDOM is retarded?

First, I have never seen an MLS data base that shows all the price reductions and when they occurred. If the price reduction was substantial isn’t it really a “different listing”? Before you answer that it is the same house but at a lower price (which is true), isn’t it then a different listing? If an agent with no backbone takes a listing at 500k that should have been listed at 400k (quite common in our current market) how is it “fair” to penalize the seller for having his house on the market for 90 days at 500k? When I later take that same house and list it for 400k the first day I have it on the market the CDOM would show 91 days. It would look to a casual observer that it had been on the market for 91 days at the 400k price. Looking more carefully, one could see that I have only had it for one day and that it was listed by someone else for the 90 days. They would be able to see the other agent’s starting and ending price and that it did not sell in the 90 day period.

But what if I was the agent who had the house listed at 500k for 90 days? And then I got the seller to lower his price to 400k? The MLS system (this is exactly how ARMLS would show this) would show that there was a price change via a little * near the list price. This * would be there for a couple of days and then vanish. So, for example on day 94, it would look like I have had the house listed for 94 days at the list price of 400k. This of course is not true. It would also look like every other buyer in the known world has passed on buying the house at its current price (400k). How any of this “helps” buyers or buyer agents – I don’t know. I am certain it does not help sellers or listing agents.

I am not saying that CDOM isn’t a valid statistic for judging market conditions broadly and in specific neighborhoods – it is. Any competent buyer agent can and would determine the CDOM prior to writing an offer. But to select which houses to view based solely on DOM is mindless. (here is an excellent letter written by Jonathan Dalton on the subject)

Just about any house can “become a good buy” by adjusting the price. There is a price at which any property can be absorbed by the market. If the house is NOW priced correctly, what possible difference does it make how long the seller failed to sell it at a price above the current price? How would having that data help a buyer logically decide anything? It isn’t a “condition” about the property that would require disclosure. Appraisals are an opinion of value. Money AngelOpinions can and do vary. Am I always right in my opinions regarding the value of real estate? I wish the answer was yes, but it is not. I am not always correct. Sometimes we err and overprice a house. We have systems in place to adjust for that error. Sometimes we price a property too low. We have systems in place to take care of that as well (as I knew you would have guessed the first one – lowering the price, the second one is just the opposite – we raise the price). When representing the seller we are wanting to find the highest possible price where the market will absorb their house. How LONG it takes us to get the seller to see that the first price isn’t working is not relevant to the true market value of that home.

When we insist that our sellers disclose any and all pertinent information about their properties, we don’t have them disclose opinions, just facts. What they, an appraiser, another Realtor or the neighbors first thought the house should be worth is only relevant in one aspect: what we now know the house won’t sell for – we know the correct price must be lower than the one that hasn’t been working. How long it took us to arrive at the correct answer can depend on a lot of different factors. As the buyer or buyer’s agent will seldom, if ever, really know all of those factors anyway, how long it took to arrive at the answer isn’t what is important. Only the answer, the price the buyer will pay the seller for that house is important. How many homes the buyer looked at and how long the buyer shopped and went “figure – figure – figure” (thinking it all over and over) in order to know a good value from a bad one is not a disclosure item to home sellers – how long the seller
took to see what was there all along, really shouldn’t matter to the buyer.