Buyer Beware the DOM

I saw this over at the eFinanceDirectory.com 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.