Days on Market (DOM): The Pitfall of Magic Numbers
What if you had one magic number that would tell you everything you needed to know about a house? That number would tell you whether to even look at the property, if it had some hidden problem, and how much you should offer for it.
Think that's too good to be true? It is, but people do this every day.
All houses on the MLS are tagged with the number of days they have been listed there (DOM, or "days on market"). People think of it as a "freshness" indicator which can tell them how attractive a property is to buyers.
Unfortunately, making assumptions about a property based on this stat alone is very deceptive and often causes people to make poor decisions based on perceptions rather than facts.
Lies, Damn Lies, and DOM
The San Francisco Chronicle describes a relatively common game that some real estate agents play with the DOM.
After a property is listed on the MLS and doesn't sell for a long period of time, that property's listing is removed, then posted again later on. The new post resets the DOM to zero and it looks like a newly offered house.
This game isn't new and because the MLS keeps a database of all transactions entered there, the relistings aren't difficult to spot. After all, you can change the pictures and the descriptions to make it look like a new listing, but you can't change the property's entire address! (Less scrupulous agents have been known to make inconsequential typos or alterations to the address to make it look different.)
What's devious about relisting, though, is the fact that it plays into people's perceptions about new properties.
Is There Something Wrong?
Agents and clients often believe there is something wrong with a property that has been on the market for a long time. That's a possibility, but if the house meets your requirements, it's usually wise to do some relatively simple investigation on the MLS or by phone to discover the real problem before dismissing a listing out of hand.
It could also be that an offer on the property fell through for reasons only known to the prospective buyer and that artificially ran up the DOM number.
Listings that appear during a seasonally slow time of year often sit for an abnormally long time because of holidays and vacations. (Savvy agents will usually account for this and hold off posting new listings during these periods.)
There might be personality issues with listing agent, the owner might be holding out, or the property may be presented poorly.
The gist is you may be able to strike a good deal if you use some social skills or some imagination. And, whatever the issue may be, it might have less to do with the property itself than the tactics used to present that property.
The Flip Side: False Gospel
Unfortunately, that argument alone is justification for some less honorable agents when playing games with the DOM figures, since the DOM can be used as just another cynical tactic. The fact is that it's harder work to sell a property which has been sitting for a while because agents will simply stop showing stale listings to their clients.
But there's a subtlety here too...
What would you offer on a house that's been on the market for a long time? Would you offer more on that same house if it were just placed on the market and hadn't sat? Probably.
Without the time on the market, there are fewer hints as to what's going on.
And therein lies another problem with relying on the DOM number: people are generally more willing to believe the asking price is credible when the DOM number is low than when it's higher.
Your offer needs to be based more on how you value the property and your willingness to walk away than on what the owner tells you the property is worth.
Bottom line: By using the DOM for what it is, a simple count of days a listing is available on the MLS, you avoid assumptions that leave you open to being gamed by less scrupulous listing agents.
Recommended Reading:
- How Much House Can I Afford? (Part 1 of 2)
- How Much Should You Allocate as a Down Payment?
- Empowering Yourself Through Your Credit Rating
- Your #1 Defense Against Getting Ripped-Off on a Mortgage
