Sunday, July 15, 2007

Buyer Beware the DOM

I saw this over at the site. Given that the Days on Market (DOM) statistic is near and dear to my heart:
Knowing how many days a home has been on the market is an important piece of information for buyers, but thanks to a new ruling, real estate agents are now able to deprive interested parties of this crucial data.

When looking at real estate, there are typically three MLS numbers buyers need most: price, square footage, and days on the market.

Unfortunately, only two out of three will be available to buyers in Southern California from here on out. The Southern California Multiple Listing Service has made the questionable decision to deprive buyers of crucial data and remove 'days on the market' statistics from listings. 'Combined days on the market' information will also be a thing of the past.

The decision was announced in the SoCal MLS online newsletter just a few days ago and has already been implemented.

Days on the market and combined days on the market statistics will still be available to real estate agents, but will no longer be included in client reports. According to the SoCal MLS BOD, in a 'changing market' days on the market stats hurt sellers and help buyers...

While there is currently no law that prohibits re-listing practices, there is no denying that such trickery is an underhanded way to make a profit. And it has to make you wonder...if there are realtors and sellers out there willing to go to such lengths to hide days on the market information, what else are they willing to do to sell a house?
Consider that yellow POS in Mill Valley in the previous post. It has been on the market for well over 1.5 years with no significant change to the property (other than its initial upgrades) yet the DOM indicates it has been on the market (this time around) for just 67 days. No doubt it will soon be taken off the listings and then relisted with a DOM of zero to make it look new and fresh as it has done many, many times over the last year and a half.

Or consider this Mill Valley shack which I first blogged back in July of 2006. It's been on the market for at least 365 days yet its DOM as of today indicates that it has been on the market for just 63 days. Nothing has been done to it; the heirs simply don't want to sell it for what it's really worth.

Pretend you are a buyer looking for a house. When you see that Mill Valley POS in the listings and then consider that its real, publicly documented (on this blog anyway) DOM is at least 570 days, what goes through your mind? Answer: "There must be something wrong with that place. I better look at other listings" or "The seller must be desperate; I bet I can get that house for a lot less than the asking price".

Now pretend you are the seller or seller's agent of that Mill Valley POS. You know that house has tried to sell for over a year and a half and failed. The seller is unwilling to lower their asking price below their loan amount (mid-$650Ks) which is essentially what the sellers are currently asking. So what do you do? You see the DOM has ticked up to around 75 so you delist the property, wait the minimum period required by law, and then relist it with a DOM of zero hoping buyers aren't paying attention.

Why, in a transitional market like ours today, is a low DOM important for sellers?
  1. A low DOM suggests that a property is new to the market and therefore more desirable.
  2. A low DOM conceals weakness in the marketplace.
  3. A low DOM conceals problems with the house and its location.
  4. A low DOM means the property has a greater chance of selling at a higher price and therefore resulting in larger commissions not only for the seller's agent but the buyer's agent as well.
Why is an accurate DOM important for buyers?
  1. A high DOM indicates that a property is not new to the market and is therefore less desirable since it has not already sold.
  2. A high DOM indicates likely problems with the property or its location and therefore greater caution should be taken by the potential buyer.
  3. A high DOM indicates that the seller is likely distressed and more willing to make a deal.
  4. A high DOM means that the current asking price is too high and that it is therefore justifiable to offer less.
It seems reasonable to me that if there have been some substantial changes to a property since the last time it tried to sell (e.g., a new roof, an addition, new floors, etc. but not lame things like new paint) then it may make sense to relist the property with a reset DOM as it can be argued that the house is in fact a new house, not like the old, previous listing and therefore needs to be re-evaluated by potential buyers.

Because it is no longer necessary to hire a middleman (i.e., real estate agent) to search for a house to buy nor is it even necessary to hire an agent to go into escrow, the sales attempt history of a house needs to be publicly available and easily attainable to the buying public and not coveted by real estate agents and doled out in controlled, potentially manipulable ways. A healthily functioning free market requires equal availability and access (by buyer and seller) to all relevant information if market pricing can be argued to be fair and justifiable.

At the very least, the DOM and other sales history info needs to be honest.


Blogger mountainwatcher said...

I agree.
DOM is vital information for a buyer.
The listing of this data should be subject to strict rules.
Who determines these rules?
Is there any regulation?

Off topic... I just came across this...

Jul 22, 2007, 2:11:00 AM  
Blogger Wally said...

In all fairness to both sides of the transaction, the only information that should be available is information about the commodity itself, and the price. It's very unfair for one party to know how desperate the other is.

Just flip the requirement to see it's fairness. Would it be fair for a seller to know how long a buyer has been looking for a house? So let's be fair.

I'm actually a potential buyer so I'm not seeing this from a prejudiced point of view.

And besides that, you shouldn't trust ANYTHING someone else tells you that you can't inspect for yourself. Sellers routinely drop a listing, and re-list just to "freshen" their DOM so it's a stupid statistic to hang your hat on anyway.

If you're serious about a property you can simply ask around, look at county records, use, and outright ask your realtor how long its been on the market IN WRITING. If he/she won't do it, that means "A LONG TIME".

The point is, time on the market is a pretty lazy way to estimate value. You are going to be spending hundreds of thousands of dollars. You should do a hell of a lot of research about the property.

Jul 22, 2007, 3:01:00 AM  
Blogger Lance said...

This comment has been removed by the author.

Jul 22, 2007, 9:22:00 AM  
Blogger Lance said...

Why should the days a property has been on the market influence its value? ... unless you have buyers looking to profit from a perceived seller's duress? And I want to emphasize perceived.

Sellers have a multitude of reasons for selling and the days on market is probably more tied to those vaired and individual reasons than to the assumed "they have to sell" that your post implies.

For example, when I was looking to buy my last house I was interested in a house for that was for sale by the real estate broker who owned it. While the immediate DOM in the listing said 60 days, I learned from the agent showing me the house that this was actually the 3rd time in as many years that the house had been put on the market ... and, because of the generally rising level of prices, the "asking price" had added a few hundred thousand dollars over the 3 years it had been listed. In other words, the house was "always for sale ... if a "really above market" offer came in. I offered price minus 5% and was turned down. I came back with full price and was again turned down. My agent explained that his suspicion was that the broker who owned the house really wasn't quite ready to sell this time around as he was having a new house built and it wasn't quite ready yet. He advised me not to give a higher offer since the broker would only use that offer to "shop the house around". (By that he meant the broker would use it to bid the price up even further by showing my offer when the timing was right for him. Sure enough, 3 months later he sold that house ... and for only a measly $10K more than I had offered when I made the full asking price offer.

His reasons for the house being on the market for over 3 years definitely weren't that he was under duress. Just the opposite, he had the time ... and the financial resources to wait until such time that it better suited him AND he could squeeze every last dime out of that place.

From this and other situations, it's been my experience that people under duress usually sell quickly and the "days on market" on the house are low. It's those people who can afford to wait who end up with a long "days on market". These are the people who's main criteria is selling "above market". It's probably best to just avoid these properties ... if you know they've been on the market for a long time ... unless you are willing and able to pay more than fair market value for the property.

Jul 22, 2007, 9:26:00 AM  
Blogger Marinite said...

Perhaps we should withold all negative information as it might adversely influence a property's "value".

Jul 22, 2007, 9:11:00 PM  
Blogger mountainwatcher said...

DOM can be a another indicator to see if a property is priced reasonably.

Obviously it is not the only indication of the value of a property.

If a property has been on the market for 261 days, one might assess that it is overpriced.
Yes, a prudent buyer should also check all of the other stats.

Walt said... "Sellers routinely drop a listing, and re-list just to "freshen" their DOM"

Why would they want to "freshen" this meaningless number?

Yikes, are we in the Twilight Zone?

Jul 23, 2007, 12:57:00 AM  
Blogger marinite2 said...

Why would they want to "freshen" this meaningless number?

And if it is so useless, why is it used at all?

Same could be said about the county median.

Look, by now it should be no secret that I am definitely pro-buyer. I support anything that favors the buyer side of a house purchase equation. Why? Because housing is so acutely biased towards the seller side. Ultimately, some day, I would hope that buyer's agents are rewarded for getting the lowest possible prices for any given house for the buyer they represent. But currently, today, that is not the case -- the buyer's agent is rewarded (in the only way that matters -- money) for getting the highest possible price just like the seller's agent.

Anyway, that's another thread. The point is that the DOM is one of the few pieces of info still out there that can give the buyer some quick feedback about a house. Although there may be a few, rare cases where the DOM is meaningless (e.g., Lance's comment) the vast majority of cases the DOM means what it suggests, the house is sitting and not selling. For large DOMs that usually means the house is priced too high. A house can be priced too high for a lot of reasons. Some of those reasons can be exploited by a buyer. Some of those reasons mean the buyer should look elsewhere. Either way, it is in the buyer's interest. Thus, the more accurate the calculation of the DOM the better.

And someone said the DOM is not needed because a buyer can "do their research" and find out for themselves how long the house has really been on the market. Thus, according to this logic, it doesn't matter if the DOM is being reset rightly or not as the buyer can "do their research". But I can tell you it is not easy to reliably track this information down for any given property and it takes a long time because the real estate industry covets their information so closely. So having an accurate DOM statistic is very useful. Yes, once a buyer has narrowed down the search of which house they are interested in they should definitely put in the extra effort and "do their research", but early in the search phase an accurate DOM is quite valuable IMO.

Jul 23, 2007, 10:24:00 AM  
Blogger Telemill said...

Puh-leese, if the DOM was not an important number in the selling negotiations then it won't have used in the first place. It was very important to list it correctly when DOM were in the single digits -- it's important when it's over 365.

Jul 23, 2007, 2:39:00 PM  
Blogger Lance said...


Of course it's important in regards to negotiations. The higher the DOM number, the more sure you can be that you are dealing with a seller who will only sell when he gets very top dollar for his property. Some people can afford to wait to maximize their profits on a property. Similarly, some people can afford to comfortably pay whatever it takes to buy exactly the property they are looking for. It takes time to get these two parties together. My guess is the higher the DOM the more the seller is willing and able to wait it out for that "perfect buyer" that will give him more for it than all other potential buyers out there!

Jul 24, 2007, 9:54:00 AM  
Blogger marinite2 said...

Saw this post over at

Why is it that you cannot lie about the price you will accept for a toaster, but you can lie about the price you will accept for a house?

If an appliance store advertises toasters for $20 in the newspaper, but will not accept $20 and demands $30 instead once you walk in the store, then the store is guilty of false advertising, and I think they have actually broken the law.

If a realtor advertises a house for sale for $400,000 in the newspaper, but will not accept $400,000 and demands $500,000 once you express interest in the house, then the realtor is praised for excellent marketing.

It should be illegal to advertise a price you will not accept, especially for such a large and important purchase.

Seems relevant.

Jul 24, 2007, 11:54:00 AM  

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