Sometimes the terminology we use in the real estate industry aren’t so clear to buyers and sellers. Let’s explain some real estate terminology, and why it is important to understand: DOM, in Realtor® jargon, or Days on Market, what does it mean to buyers and sellers?
When a home sells, several useful statistics are recorded.* Understanding those statistics in your local market is one key to having success in selling, as well as buying a home. The number of days that the home was on the market before it sold, or DOM, is a useful number.
These numbers are all kept by the Multiple List Service (MLS) and we can see the average days that it took to sell a home in any number of categories, by neighborhood, by zip code or by city or county, or by price range.
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How is Days on Market Counted?
“Days on market” in real estate refers to the number of days a property has been listed for sale before it is sold or taken off the market. The days are counted from the day the home goes into “active” status (which does not include “coming soon” status) and end on the day the house goes “under contract”.
Note that the home will still appear in the MLS, and all the sites that get their feeds from the MLS, even though it is “pending”, or “under contract”. Even though a home is under contract, the real estate agent will still market the home if the listing agreement stipulates it, and most do. The reason is that there is always a chance that the deal will not go through, for any number of reasons, and continuing to market the home could bring other buyers that might make offers if that unfortunate occurrence happens.
Four Ways “Days on Market” is Useful
- Days on Market is an important metric that helps gauge the demand and desirability of a property. A shorter “days on market” typically indicates a higher demand and a faster-selling property, while a longer “days on market” may suggest a lower demand or potential issues with the property.
- Another real value comes in comparing these averages in DOM over time. This average tells us how the market is doing in general. If it is taking four months to sell a home compared to two months at the same time a year ago, we can tell that demand in the market has slowed down.
- A third value of the DOM metric is that we can use it to measure demand over geographic areas, like neighborhood, zip code, or even school district. If it takes two months to sell a home in one zip code or neighborhood, and it takes four months on average in another area, or the entire county, then we know that that neighborhood is in demand.
- A fourth bit of information that DOM can tell us is the demand according to particular aspects of real estate, like price range, home style, type of housing, etc. For example, homes that sell in the upper luxury price ranges typically have a higher DOM than homes that sell in lower price ranges.
Of course, there are several other variations of measurement that can be helpful about measuring the Days of Market metric. All of these uses help us by giving buyers and sellers proper expectations.
How Knowing Days On Market Helps A Buyer
Knowing the days on market metric can help home buyers in a few ways. Firstly, it can give them an idea of how quickly homes are selling in a particular area. If the average days on market is low, it may indicate a competitive market where homes are selling quickly.
On the other hand, if the average days on market is high, it may suggest a slower market where homes are taking longer to sell. This information can help buyers gauge the level of competition they may face and adjust their expectations accordingly.
DOM serves to help a homebuyer gather important information about a particular listing. As an example, if you see a particular home that has been on the market for 120 days, and the average DOM for the neighborhood is 60 days, that tells you that something is wrong. Either the house is priced too high, or there is something wrong with the condition, or both. If you look closer and see that the home has not had a price reduction since being on the market, you might deduce (with some accuracy) that the seller is not realistic in their pricing, or not very motivated to sell.
Buyers: A seller’s motivation makes a big difference when you consider making an offer on a home.
Likewise, when you see a home that has been on the market for 30 days and has had 2 price reductions, you can accurately guess that the seller is motivated. Negotiating with a motivated seller is much more likely to end well. That seller is more likely to appreciate a fair offer than an unmotivated seller. The negotiation will stand a better chance, given there are no other surprises or issues.
As far as real estate terminology, days on market is a useful statistic for home buyers. If correctly used, it will help you decide on an offer price. It can give you insight into the seller’s mindset, and help you develop your negotiation strategy. Or, it can clue you into the fact that you might just want to move on to another home.
How Knowing Days on Market Helps A Seller
Knowing the average days on market can help a home seller in several ways. Firstly, it provides them with an idea of how long it might take for their property to sell. This information can help them plan their finances and make necessary arrangements.
Additionally, a seller will be better able to have a good pricing strategy by knowing the average days on market. If the average days on market is low, it indicates a high demand for properties in the area, and the seller may be able to set a higher asking price. On the other hand, if the average days on market is high, it suggests a slower market, and the seller may need to adjust their price or marketing strategy accordingly.
A seller should know the numbers in their neighborhood and in their price range. When a home sits on the market longer than the average number of days that it takes for comparative homes to sell, it can hurt the marketing of the home. The home can become stagnate and develop a “stigma” in the eyes of potential buyers.
Buyers start to wonder, “what’s wrong with the house?” when they see that it has been on the market significantly longer than other comparable homes. Then they start to look for the problems.
As a seller, it helps you to understand and keep an eye on the average days on market of comparable homes. These are markers of how your home is doing in a competitive framework.
Real Estate Agents Should Master Market Statistics
Whether buying or selling a home, choose an experienced agent who knows the statistics and trends for your neighborhood and market. A real estate agent should be a trusted adviser, willing and patient to teach about real estate statistics like DOM – days on market, and to give expert advice about your home selling strategy.
Then, of course, listen to the advice, consider their expertise, and be sure to ask questions. Most real estate agents are looking for a win-win for all parties. This is the best avenue for success in a complicated transaction like real estate.
Meaningful Statistics in Your Local Real Estate Market
*Several other useful statistics kept by the MLS, all compared to the previous year:
- Percentage of average sold price to list price. If homes in one geographical area, or in a particular price range, are selling for 102% of the list price, whereas other locations and price ranges are selling for 98% of list price, we can make several conclusions about the demand.
- Average and median home prices. These metrics are useful by comparison year-over-year, or by comparing areas.
- Number of listings, number of sold homes, number under contract and contingent, all used in comparisons.
- Number of homes listed and sold by price ranges and by number of bedrooms
- and much more.
Agents have lots of data at their disposal to help buyers and sellers understand what’s going on in their local market. We study the data every month when it comes out (and some of us write a synopsis of what it means:) It helps tremendously when we’re trying to understand the local market trends to help our clients.
All of these statistics together show a picture of the market that helps a seller determine a listing price and strategy. They can give the best advice to a buyer on an offer price to get the home of their dreams.
Local Market Statistics Matter
All real estate is local. Whatever the headlines say about real estate nationally or in any other place, the statistics that really matter are right here in central Maryland. Real estate is about supply and demand. The days on market statistics shed a lot of light on the local supply and demand.
In conclusion, the days on market metric is a valuable tool for both home buyers and sellers in the real estate market. For buyers, it provides insight into the demand and competitiveness of the market, allowing them to make more informed decisions and potentially negotiate better deals. For sellers, it offers a gauge of market activity and helps them set realistic expectations for the time it may take to sell their property. Overall, understanding the days on market metric can be beneficial for all parties involved in the real estate transaction process.
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