The number of days a home has been on the market can change the way a buyer makes an offer. For a neighborhood or market, the average days on market reveals a lot about local demand for housing. “Days on market” in real estate refers to the number of days a property has been listed for sale before it is sold or removed. But what does this number actually mean, and why is it important? Read on for why days on market matters.
What days on market measures
Days on market refers specifically to the amount of time the home is posted on the Multiple Listing Service, or MLS, where agents access local properties for sale. The timer starts when the home goes into active status and stops on the day the house goes under contract. It’s important to note, though, that even when a home is under contract, the agent will continue to advertise it if the listing agreement stipulates it? Because there is always a chance that the deal will fall through, agents like to keep their options open. Note that the home will still appear in the MLS (and all sites that get their feeds from the MLS) regardless of “pending” or “under contract” status.
Interpreting days on market
Why do days on market matter? It’s important to understand some of the ways in which they can impact the sale of your home. Consider two scenarios for example. First, imagine that a buyer makes an offer on your home that’s been listed for 48 hours. As a seller, you probably don’t feel desperate to close yet. The buyer knows that it’s a new listing and will expect you to be pretty rigid on the price. Therefore, they will likely make an offer close to asking. Alternatively, imagine your home has been listed for 60 days. Buyers will assume you’ve had a lot of showings but not many offers. They’re likely to make one fairly lower than anticipated knowing you’re probably antsy to sell. Both scenarios illustrate that it’s important to sell your home quickly. The more days on market, the harder it’s going to be for you to negotiate a deal aligned with your asking price.
Why days on market matter to buyers
Days on market tells us more than just how long a home has been for sale. It also provides insight into how buyers in general perceive the home. Knowing this metric helps buyers in several ways. Firstly, it gives them an idea of how quickly homes are selling in a particular area. A low days on market average indicates a competitive market where homes sell quickly. If the average days on market is high, it suggests a slower market. This information can help buyers gauge the level of competition they face and adjust their expectations accordingly.
Days on market matter because they help buyers understand particular listings, too. For example, if you see a home listed for 120 days and the average for the neighborhood is 60 days, something is wrong. Either the home is overvalued, there’s a problem with the condition, or both. If upon further inspection a buyer sees that the home hasn’t had a price reduction since its listing, they may conclude that the seller is not motivated to close. A seller’s motivation, of course, makes a big difference for buyers considering making an offer on a home. Likewise, when buyers see a home that has been listed for 30 days and has had 2 price reductions, they can assume that the seller is motivated. Negotiating with a motivated seller is more likely to end well. That seller will probably be more receptive to a fair offer than an unmotivated seller would. Negotiations run more smoothly given no surprises or issues. So with deeper insight into the seller’s mindset, buyers can better develop their negotiation strategies.
Why days on market matter to sellers
When it comes to days on market, the stakes are even higher for sellers. Newly listed homes typically generate the most interest. After the first few weeks, hype around the home tends to drop. Once all potential buyers in the area have seen the home, sellers are limited to the smaller population of new buyers entering the space. Knowing the average days on market also allows the seller to create a strong pricing strategy. If the average days on market is low (indicating a high demand for properties in the area) the seller can set a higher asking price. On the other hand, if it’s high (suggesting a slower market) the seller may need to adjust their marketing strategy or price accordingly.
A seller should know the numbers in their neighborhood as well as their price range. A home that stays listed longer than the average number of days can become stagnate and develop a stigma in the eyes of potential buyers. They’ll wonder what’s wrong with the house when they see it on the market significantly longer than other comparable homes. They then 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.