What does Days on the Market Mean For a Home Buyer?

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When I am out showing property to prospective buyers, one of the most frequently asked questions I get about a property is "How long has it been on the market?

The number of Days on the Market (DOM) is an important statistic. It helps gauge whether a home is priced correctly. There is a direct relationship between the length of time it takes for a home to sell and how far above it's value the asking price is set. Right now in Broward County the average days on market is 47 for single family homes and 54 days for condos. Some homes sell in a day or less and others linger on the market for months and even years without selling at all. It is a good idea to try and find out the average DOM for the neighborhood or condo building you are interested in. That number could be much different.

Last year I had a sale in the Idlewyld neighborhood of Fort Lauderdale. It was on the market for 187 days which seems like a lot. There was nothing wrong with the house except for some minor flaws. Idlewyld is one of Fort Lauderdale's nicest neighborhoods. The average sale price in the neighborhood was just over $2,000,000. However, because of the price point, the average for the neighborhood in 2018 was 201 days on the market.

So when I answer something like "Its been on the market for 125 days" I get the eye roll and a comment like "It must be overpriced" or "So what's wrong with it?". It is over-priced is in most cases. But check what the average is in the immediate area first. Many, many new listings start well above their market value and then lower their price until they finally get some action. That is the wrong way to do it, but that will be the subject for another article. A more important number for a buyer is how long has it been on the market at the current price. In the earlier example what if the home has been on the market for 125 days, but it just had a 5% price reduction and is now priced to sell. That would be a much more important piece of information.

Better questions to ask are What is the market history? and What is the average days on market for the neighborhood? The market history is readily available in the MLS. Once you know the average days on the market and the history of any price changes you are a much better informed buyer than simply knowing the days on market.

Now that a buyer knows the days on market or days at the current price, and the average DOM for the neighborhood, what should they do with this information? If they like the home they should make an offer for it, regardless of what the price is. If it appears to be over-priced and on the market a long time, a buyer has a couple choices. 1. Make an offer based on its true market value. 2. Do what most people do and wait for further price reductions.

Option 2 may not get you the desired result. With few exceptions, the overall market is appreciating, and the value will eventually catch up with the seller's price. In three, six or nine months it will be worth more than it is today and you won't save any money. Or, if it does drop in price you can count on increased competition from other buyers. One thing all buyers should know is, if they like a property chances are someone else does too.

A home with a high number of days on the market is usually unattractive to most buyers, no matter how nice it looks. They wonder if there is something wrong with it other than the price? Once under contract you will have the opportunity for due diligence. An inspection will tell you if it has flaws. Ask for a sellers disclosure statement. If the seller knows about needed repairs or something else that may affect it's value they must disclose that information.

Most people would agree that the longer a home is on the market the more likely a seller will bend to an aggressive offer. There is only one way to find out. Make the offer.

Here is Why You Should Make Offers on Over Priced Homes

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