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  • Jeremy Hart, Real Estate Professional in Blacksburg

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« Earth From Above | Main | Weathering The Real Estate Storm »

October 08, 2008

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Ryan

DOM certainly matters to me, Jeremy. As a buyer it's one of the first things I look at on the listing - though I've never really considered it a measure of the home's quality or value (perhaps because I grew up in a family-owned home improvement business and developed a understanding of those on my own).

I look to DOM as a way to measure the seller's motivation. Combined with other factors like pricing/reduction history and the seller's personal situation (ex. is there another mortgage somewhere), I find DOM useful.

Of course, if every agent was like you and chose to decline dual agent agreements, this wouldn't be as relevant!

In the end, I suppose the *true* value of the home doesn't change with increased DOM, but it would be interesting to see data for the seller's perceived value as DOM increases (because there's certainly some value in washing one's hands of an empty home).

Clapp

NRVLiving,
As a faithful reader of your blog, I would like to put my two cents in on this topic. I disagree with you from the standpoint of a basic sales principal. Just like any item whether it's a house, car, or a piece of clothing, it has a shelf life. The longer something hangs around without selling it's value is diminished to a buyer. Not necessarily from what it's worth but from the value place on it by a person who is buying it. For example, since its the fall of the year and the new model year. Here's is car "A" that is brand new with zero miles that is a left over 2008 model. Then we have car "B" that has zero miles as well but it's a 2009 model. They are equal and unchanged but since the 2008 model is one model year older it will need to be reduced in order for it's value (in the eyes of a buyer) to be equal to the 2009. This is the same scenario for a listing that has been on the market for 180 days versus the identical house next door that just came on the market today. If someone hasn't seen the value in the listing on the market for the past six months they most likely will not pay the full price as compared to the new listing.

Plus another factor to consider is the reason we keep the DOM statistics. Real estate inventories and DOM are barometers for how the market is doing. In a hot market prices go up and DOM come down. In this market it's just the opposite.

I know you'll disagree but I wouldn't pay the same for a house that had been on the market for six months as compared to a new listing fresh to the market.

The ball is back in your court.
T

Jim Duncan

Funny, I have a post scheduled on this for next week - I think DOM absolutely matters.

For example, in the Charlottesville market, there are 350 homes on the market that are under contract.

122 have days on market of less than 30 days. I'd argue that those 122 properties were priced better than the others.

Candy Lynn

Jeremy:
I get that question all the time.
My reply is "In this market, DOM is not as relevant as the listing history & a current CMA that includes recent solds and currently listed homes.

BTW our current inventory in LBVRAR is over 45 months at current rate of sales but the days on market range from 175 days to over a year. We're seeing many listings expire & not renew or be withdrawn.
All of this makes it very difficult to place much value on DOM.

Sarah Cooper

Price and condition matter, and Days on Market can reflect problems with either. That said, it doesn't *always* matter.

When we bought our current house, it had been on the market for nearly a year. It had gone into contract almost immediately, but lingered as a pending sale while the buyers tried several ways to get financing after their original lenders backed out. It was in contract a second time, off the active market, frustrating the sellers and going nowhere again. The pictures online were so bad that I didn't even want to set foot inside it, but my real estate agents knew me well and insisted. In the doorway, I knew it was my house. I couldn't have cared less about DOM.

DOM can indicate a flaw or a problem with the house, or in the case of the house we bought, horrible listing photos. Overpricing is easy to spot. Sometimes though, I think it's just that things work out as they should and the house is ready when the right buyers are there.

Brian Block

Jeremy, while days on market doesn't affect value per se, it does affect a buyer's perception of value and in turn affects the price that that house will fetch. It can reasonably be used as a guide to determine how willing a seller may be to negotiate a lower deal.

Diana Blair

The Absorption Rate is also a consideration when evaluating the DOM. If you have 40 houses in the $400,000 - $500,000 price range with a market absorption rate of 10 properties per year, then the number of buyers in the price range is an issue to review with the sellers for market positioning and with buyers who are interested in making an offer. Obviously, pricing the property so that it is in the ten properties that sell would be important.

I agree many buyers consider the time on the market important which brings up properties that are relisted as new by the listing agents.

Jeremy Hart

Brian, if DOM doesn't affect value then why are we using it as a negotiating tool? Either the house is overpriced, or it's functionally imperfect ... that's the piece I'm struggling with, it seems black or white to me. I know you've had clients who have said "I'm not adjusting my marketing point (read: price), tell them to bring me an offer!" We all have worked with that person, they've been on the market a long time and they're not going to adjust their price, so despite having been on the market a long time they're not willing to "deal". How is DOM a good indication of their motivation?

Diana, absorption rate should definitely be discussed, I think, it's certainly a measuring tool. If there is 45 months worth of inventory on the market (which I know VA has in one particular niche), then I'm not concerned if I'm seeing a property on the market for a year. That's a good point.

Ryan - thanks. Sole agent Dual agency is undermining our credibility as an industry. Just sayin'. But related to DOM, it's interesting you pondered the seller's perceived value vs. DOM - that's one piece I'd not considered, I know how buyers seem to be looking at DOM, but how are sellers? I'll need to look into that.

Clapp - should've known that the guy who changes cars about as often as he cuts his hair would've compared it to a car dealership! :) I can see your point about a 2008 vs. 2009 model ... there's a perceived value in a car, but a car is a depreciating "asset" (and I use that term loosely). A home is a product that, while some areas of the country are certainly depreciating, in most cases is not - it's an appreciating product. So why do we count DOM against that asset?

Jim - crap, it's hard to argue with that logic. Still shaking my head on how to counter that.

Sarah - I'm sure that's a great feeling as a buyer, to just KNOW. Sometimes as an agent, I know the client so well from my dealings with them that I just know, as well. My second transaction ever was that way, I walked in to preview and just knew they'd buy it. So what you're saying is that there are factors that are not quantifiable that override DOM - is that right?

Candy Lynn - if you're not placing much value on DOM, how are your clients responding? Are they following your lead, or resisting and falling back on a DOM=value correlation?

I guess I'm struggling with the fact that if a house is priced right and it's still not selling, how does DOM play into what the value is?

Darla

Jeremy, you said "I guess I'm struggling with the fact that if a house is priced right and it's still not selling, how does DOM play into what the value is?"

The simple answer is, it doesn't. I'm not a realtor and never have been. I have, however, bought and sold a few homes. Some buyers might look at DOM and think that a seller will be "motivated" (realtor term) or even "desperate" (civilian term) to accept a lowball offer if the listing is stale. But keep in mind that buying a home is an emotional investment, too. It's not "black and white," no matter how hard you try to squeeze it into that category. Some homes are quirky, some are in remote locations, some smell funny, some have narrow steps or low ceilings or small windows or bad decorating. I believe that there is a buyer for every property, but it's a matter of timing and taste. Sometimes DOM means nothing more than most buyers' inability to see past awful paint colors or unkempt landscaping. Those things are easily remedied and don't drastically affect the value of a property, but may cause DOM to rise as buyers look elsewhere. Not all buyers can see past the quirks, so a house sits longer. It's not just about location, features, and price, but for the buyer it's also about "feeling home."

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