Churning Home Listings, Days On Market Versus Continuous Days On Market
I recently read a post from The Front Steps blog on resetting the days on market (DOM) data field on the Multiple Listing Service (MLS). Although the post was a request for comment (which I did), I thought I would give an expanded version of my thoughts on the subject.
The DOM data field in the MLS reports the amount of days a listing has been listed on the MLS. By prematurely pulling a home off the market and resubmitting the property back on, it appears to the public that the home is a new listing. Is this manipulating the system or just providing the seller’s home a fresh look to potential buyers?
To start with, the DOM stat doesn’t give the buyer a true indication of the amount of time a home may have been actively marketed. Agents have been known to market “pocket listings” for days, weeks, and sometime months before a home is placed on the MLS. We’ve all seen “For Sale” signs with a “Coming Soon” rider. We call the office who’s name is on the sign, only to find out they can’t find any information about a home at that address. Still others continually “list” homes for sale on Craigs list as exclusive listings, “Not on MLS” (yet!).
While some of this marketing is done while the home is being prepped for showing, a good portion of the time it is an attempt by the agent to sell the house themselves (ie. doubleend the transaction). The big winner here is the agent. The big loser is the seller. It is ok to allow an agent a reasonable time to market your home off the MLS (while it is being prepared for market). However, if you want to maximize your sales price, never and I repeat NEVER take an offer before the home has had full exposure to the market.
Potential Home Seller Benefits Of Relisting And Resetting The DOM:
- The home appears and is treated like a new listing. DOM returns to zero and the clock begins to tic. Potential buyers who have signed up for automated e-mail listing programs are automatically sent an e-mail with this home as a new listing. Usually, the home is also re-toured on the Realtor’s broker tour as a new listing. The end result is more exposure to agents and potential buyers.
- Protects Seller’s equity position. Buyers frequently ask how long a home has been on the market? Why? Whether consciously or unconsciously, buyers have developed a method of determining value for the home they want to buy and somehow the DOM is included into that valuation. The longer a home sits on the market, the larger the discount a buyer will factor into their valuation. Take the DOM data out of the equation (which resetting the DOM data field does) and a buyer isn’t as comfortable with their valuation. The more unique the home, the more uncomfortable the buyer will be.
Potential Problems For The Seller:
- Reverse of above. Buyers who have been following the market (and if you are a buyer you better be active in learning about the area and home prices) will realize an agent is “gaming” the system and avoid the home and the agent. The result is a stale home that sells (if it does sell) for substantially below market. I recently sold a home that, when presented to the market on the MLS, was slightly above market for our area. Buyers and agents realized the value wasn’t there and stayed away. Comments like “What’s the seller smoking” and “the agent bought that listing” were heard at the broker’s tour. The price was reduced 5% in a matter of two weeks, still no activity. We went in and bought it 5% below the reduced price. SOLD! Recent comps for the neighborhood and the lender’s appraisal indicated that my buyer did rather well. This all happened in 3 weeks. My buyer was educated about the neighborhood and home values that the DOM had no influence on their decision. Other buyers and agents were probably thinking, I’ll wait another few weeks and then go in with a low ball price. They were factoring DOM into their valuation and factored wrong. While the listing agent wasn’t intentionally “gaming” the system, the result cost the seller money by reducing the field of potential buyers.
Potential Problems For The Listing Agent:
- Reputation. Yes, most real estate agents care about their reputation. Some have good reputations and some have bad ones. Get a reputation for playing games and given a choice, other agents won’t want to work with you. Ask any agent who has been working for more than 5 years and they will recall a moment in time when they got completely #%^*%@ by another agent. Whether right or wrong, we’re all human and remember these things. Once an agent gets a reputation for unfair or unethical behavior, it will eventually come full circle and hit him/her in the pocketbook. More importantly, it will hurt their client chances of getting their offer ratified. As a home buyer, have you ever heard “the seller went with another buyer…but their offer wasn’t as good.” That’s your agent’s reputation affecting your purchase options. Hum, it does matter who you work with!
- Possible MLS board violations and potential sanctions. When agents enter data into the MLS, the MLS rules stipulate that the information must be accurate and not misleading. By continually “gaming” the system, it can be argued (although I haven’t seen any cases) that the agent is misleading the public about the true time on market for the home.
Local MLS Service Has Possible Solution:
Kevin Boer, in his article Stale Tuna And Resetting The “Days On Market” — Chicanery And A Public Health Risk, Or Just Plain Old Good Salesmanship, describes what our local MLS has done to make the DOM more accurate. The DOM clock can be reset only if the property has not been listed within a period of one month. Our local MLS has also uses the term continuous days on market (CDOM). The data in this field keeps a continuous count of days regardless whether the home has been churned. So if you are looking to use DOM as a tool to assess the value of a property, I would suggest using CDOM.
What do you think?
