The obsession to keep the Days On Market (DOM) “accurate” is just one example of a misevaluation of relative importances. Our local MLS, Arizona Regional Multiple Listing Service (ARMLS) fixed up the system so it would show the “true days on market”. If a property had been listed before then the Cumulative Days On Market would show up on a one-line printing of listings and on a full print-out. The agent days on market is also shown, but each and every listing shows the “cumulative” DOM and one can even do a search of the MLS based on the DOM. Any days on market with another company or another agents in the past 90 days shows up in the cumulative number (CDOM). This fabulous benefit to “tranparancy” is now common in many Realtor multiple listing systems around the country. There are articles in the press about how agents have “tricked” the buying public by canceling and listing the same house again, giving it a new MLS number – and thus resetting the DOM number to zero.
Setting aside that I am a listing agent and the fact that the seller ultimately pays the commission that the buyer agent collects (in Arizona, the listing agent pays it, with money he or she has collected from the seller) – why do I think CDOM is retarded?
First, I have never seen an MLS data base that shows all the price reductions and when they occurred. If the price reduction was substantial isn’t it really a “different listing”? Before you answer that it is the same house but at a lower price (which is true), isn’t it then a different listing? If an agent with no backbone takes a listing at 500k that should have been listed at 400k (quite common in our current market) how is it “fair” to penalize the seller for having his house on the market for 90 days at 500k? When I later take that same house and list it for 400k the first day I have it on the market the CDOM would show 91 days. It would look to a casual observer that it had been on the market for 91 days at the 400k price. Looking more carefully, one could see that I have only had it for one day and that it was listed by someone else for the 90 days. They would be able to see the other agent’s starting and ending price and that it did not sell in the 90 day period.
But what if I was the agent who had the house listed at 500k for 90 days? And then I got the seller to lower his price to 400k? The MLS system (this is exactly how ARMLS would show this) would show that there was a price change via a little * near the list price. This * would be there for a couple of days and then vanish. So, for example on day 94, it would look like I have had the house listed for 94 days at the list price of 400k. This of course is not true. It would also look like every other buyer in the known world has passed on buying the house at its current price (400k). How any of this “helps” buyers or buyer agents – I don’t know. I am certain it does not help sellers or listing agents.
I am not saying that CDOM isn’t a valid statistic for judging market conditions broadly and in specific neighborhoods – it is. Any competent buyer agent can and would determine the CDOM prior to writing an offer. But to select which houses to view based solely on DOM is mindless. (here is an excellent letter written by Jonathan Dalton on the subject)
Just about any house can “become a good buy” by adjusting the price. There is a price at which any property can be absorbed by the market. If the house is NOW priced correctly, what possible difference does it make how long the seller failed to sell it at a price above the current price? How would having that data help a buyer logically decide anything? It isn’t a “condition” about the property that would require disclosure. Appraisals are an opinion of value. 
Opinions can and do vary. Am I always right in my opinions regarding the value of real estate? I wish the answer was yes, but it is not. I am not always correct. Sometimes we err and overprice a house. We have systems in place to adjust for that error. Sometimes we price a property too low. We have systems in place to take care of that as well (as I knew you would have guessed the first one – lowering the price, the second one is just the opposite – we raise the price). When representing the seller we are wanting to find the highest possible price where the market will absorb their house. How LONG it takes us to get the seller to see that the first price isn’t working is not relevant to the true market value of that home.
When we insist that our sellers disclose any and all pertinent information about their properties, we don’t have them disclose opinions, just facts. What they, an appraiser, another Realtor or the neighbors first thought the house should be worth is only relevant in one aspect: what we now know the house won’t sell for – we know the correct price must be lower than the one that hasn’t been working. How long it took us to arrive at the correct answer can depend on a lot of different factors. As the buyer or buyer’s agent will seldom, if ever, really know all of those factors anyway, how long it took to arrive at the answer isn’t what is important. Only the answer, the price the buyer will pay the seller for that house is important. How many homes the buyer looked at and how long the buyer shopped and went “figure – figure – figure” (thinking it all over and over) in order to know a good value from a bad one is not a disclosure item to home sellers – how long the seller
took to see what was there all along, really shouldn’t matter to the buyer.
Cathy says:
Russell,
If the information is so unimportant, why not let buyers have it?
March 20, 2007 — 4:24 am
Danilo Bogdanovic says:
This is a topic that I feel is worth national debate yet I barely read about it so thank you Russell!
Do you ask the salesperson at the car dealership how long a car has been on their lot? Do you ask the guy working the computer section of Best Buy how long a particular notebook has been on sale at that price for? Do you ask the salesperson at Nordtsrom or DSW how long those shoes have been at that particular price for?
No…you don’t. You either think they’re worth the money and buy them or you don’t. It doesn’t cross your mind to ask any of those questions nor even consider them when it comes to most any other product.
So why does it matter when it comes to a property? Evaluate the comps and see what comparable properties have sold for to see how the property is priced, check what other properties are available in that same price range and determine for yourself whether the property is worth the price to you or not. It’s really that simple.
March 20, 2007 — 6:11 am
John L. Wake says:
“how long the seller took to see what was there all along, really shouldn’t matter to the buyer”
But “How long has it been on the market?” is one of the first questions many buyers ask when they walk in to a listing so apparently it does matter to them whether I like it or not.
March 20, 2007 — 8:01 am
Brian Brady says:
If the MLS never had DOM as part of it’s report, it wouldn’t be of importance.
I like Danilo’s comment here. And Cathy’s right…give it to them or remove it completely.
March 20, 2007 — 8:05 am
Doug Quance says:
DOM is really important is when you are ready to place an offer. If the property has been on the market for quite a while – and it’s still overpriced – then the seller might finally come to the conclusion that it’s overpriced.
If it’s a new listing, this conclusion may not be so forthcoming.
I always tell buyers not to be concerned with DOM… just like they shouldn’t care how much the sellers paid for the property – because that’s relatively irrelevant info.
The question is “How much is this property worth” and “How can we purchase it at the lowest price and best terms”.
Russell, as usual, is correct. What difference does it make if the property has been on the market for an extended period of time because an incompetent agent suggested an unrealistic list price?
March 20, 2007 — 8:43 am
John L. Wake says:
Russell,
If ARMLS added a line to the full listing report that had the original price and the last price change (date and price) would that solve the problem?
Do you see any technical solution besides ARMLS withholding that information from it’s members?
March 20, 2007 — 9:31 am
Athol Kay says:
All this discussion makes perfect good sense.
However many people are unable to shop for houses rationally.
That why we get irrational factors like meaningless facts turned into meaningful perceptions.
March 20, 2007 — 10:38 am
Todd Tarson says:
Up here in tiny old Kingman we just went with CDOM as opposed to DOM. Set up much like ARMLS as it sounds. The new data set is very interesting. I’ve seen property with over 600 CDOM, and even higher.
The first thing I think when I see such a number is why did the MLS Member let the seller push them around the way they did. You price a property to sell, not to collect days on the market.
I got fired by a client recently on a listing that I felt compelled to take (long story) that was vastly overpriced. In turn my former client hired another agent that listed the property for even more money. Alas the property sits collecting DOM. So glad I got fired.
I show prospective listing clients DOM and CDOM in an effort to help them understand the market and where successful transactions take place. Now that I’m a busy agent again I will be tracking my listings DOM and compare them to the average DOM to prove I’m better than an average representative. To me CDOM is for me and my efforts more than it is for buyers and sellers, but I can see how buyers would want the data… I’d be willing to give it to them via IDX and other avenues so they wouldn’t even have to ask me.
March 20, 2007 — 10:44 am
Jim Kingsland says:
With all due respect to Russell.. this type of thinking gives realtors a bad name. Transparency is needed and being evasive and controlling about the facts involved in the sale is a negative. The time it takes to sell a property is a proxy for DEMAND and whether it was priced properly to begin with and the condition of the market that it was sold in.
You must remember this simple conflict in life: supply vs demand. Anything that can help the buyer or seller understand the dynamics of supply and demand will make you clients happier.
March 20, 2007 — 12:00 pm
seth levinsky says:
It does not matter how long a property has been on the market if it is fairly priced. You are all driven by a code of ethics or you wouldn’t be in the business. I’ve been in South Jersey,buying, developing and reselling for almost 25 years. The best in the are is by far McCann Realtors. Check them out at http://www.mccannrealtors.com. They’ve been around for 70 years and know the Jersey Shore like the back of their hand. They are the model for ethical selling in the area and I use them because my properties move as well.
March 20, 2007 — 12:45 pm
eddie says:
I think everyone’s missing the point with days on market and why some MLS’s like the one in Southern California is withdrawing it on some of their paperwork. The SELLER highers their agent to list the property and to get the highest price. If the MLS service is used and that information is readily available the seller’s position is automatically compromised. He hired the agent who hired the MLS to perform a specific task which is simply to represent him and not compromise his position.
MLS is a private entity and doesn’t have to give free information to the public. If relevant information is needed get a subpena!
February 20, 2008 — 10:57 pm