There are many factors that a contribute to a home’s attractiveness: location, architectural style, amenities, etc. There is one; however, that has no bearing on a home’s future viability or intrinsic value: days on market.
Simply being on the market for a long time can reduce a home’s market value simply through the power of perception.
It doesn’t make sense, logically, that a factor that has no bearing on a potential buyer’s future satisfaction in the home has such influence.
However, the majority of potential buyers looking at a home that has been on the market for a long time may assume two things: either there’s something wrong with the home, or it’s overpriced, and that is why it hasn’t already been snapped up.
Buyers are advised by their agents that a deal can be made when a home has been sitting on the market for a while, and negotiations can be brutal.
It’s tempting to blame the media. After all, average days on market is one of the key indicators dutifully reported on each month by the real estate press.
Shorter days on market is considered to be a sign of desirability both for individual homes as well as for neighborhoods. When realtor.com rounded up its “hottest” ZIP codes in an annual survey this fall, median days on market was along with overall views and percentage of homes owned by millennials.
It is, however, a bit of a false equivalency. After all, days on market doesn’t always mean desirability.
In fact, in the methodology of the realtor.com data, it was clear that the days on market can often simply be an indicator of affordability or limited supply.
Days on market doesn’t necessarily say anything about the house itself, or even the neighborhood; and yet, when we see a home that has sat on the market for a long time, we immediately ascribe a level of desirability to it.
Sometimes the property might be listed with a seller who is perhaps “testing the waters” or on the fence about selling, unaware that their indecision could be impacting their bottom line.
At Concierge Auctions, we’ve been crunching the numbers lately on days on market for luxury properties and will have data to share in the coming weeks; but one thing that is abundantly clear is that a home’s days on market in and of itself should have little bearing to the consumer on whether the home is worthy of consideration.
If anything, days on market for an individual home, to be evaluated fairly, should be expressed alongside the average for a similar home in a similar neighborhood within a similar period.
Factors that influence days on market
As agents (but not all buyers) know, days on market for an average starter home will mostly be much shorter than days on market for a luxury home where the pool of buyers is much smaller.
Time of year can also play a role in some markets, especially those with seasonal or vacation property.
When we present days on market as a factor that is the same across all price points, it simply doesn’t make sense. A property’s days on market alone doesn’t indicate if it’s within the average amount of time that a home of its price and location generally stays on market.
Days on market really only indicates one factor, the date the property landed on a multiple listing service.
Days on market may not be a fair metric for determining a property’s desirability, but it is one every agent must contend with, which is why a strategic approach is critical.
And why it’s important to make sure all your marketing is in place on day one. It’s crucial to make sure your clients understand that once the clock starts ticking, they need to be serious and ready to take an offer.
It’s also why, in some markets, pocket listings or whisper listings have become popular. We all have our own ways of trying to tame the beast — it is not one that is going away anytime soon.
Chad Roffers is the chairman of international luxury real estate company Concierge Auctions. Follow him on Twitter.