How Days on Market Can Affect Home Value

What is the difference between a Berks County home that has been on the market 10 days and a Berks County home that has been on the market 300 days? Answer…290 Days! While that answer may be mathematically and factually correct the answer may be different if you are a Berks County home buyer or seller as it relates to value. When I do a value analysis ("CMA") with a prospective home seller there are several variables to consider. One of them is homes that have recently sold that are similar to the sellers’ home. Obviously the sold price of the comparable homes is an important factor. It is also important to consider the price the home was originally listed for, subsequent price changes (if any) and total days on the market. In this case the days on market (“DOM”) are broken down into periods between price changes. We can then estimate where to price the sellers home and where not to. In this case “DOM” helps us avoid making the same pricing mistake other home sellers with similar properties made. Buyers in Berks County and around the country ask many questions when shopping for homes. There are some questions asked with great consistency like “What is the Price”, “Why are they moving” and “How long has the home been on the market”. The latter two questions are actually the start of a possible negotiation. The buyer is attempting to gather information that may assist them in buying a home at the lowest possible cost. The part to take particular notice of is that these questions are often asked before the prospective buyer has visited the home. Buyers have access to the same information agents’ use relating to price, “DOM” and many other home factors. The only thing that is not posted online is why the seller is moving unless it is a short sale or bank foreclosure (REO). They also do not have what is known as the "PMP". Several years ago the multi-list system that governs Berks County, Trend MLS, decided to add a separate category known as Previous Marketing Period or “PMP”. Now we have Days on Market “DOM” and “PMP”. Here is the difference…A home is listed by a Berks County real estate Broker for 90 days and the home does not sell. The seller chooses a different broker and the home is back on the market within 3 days. 10 days pass and the home has not yet sold. Now the “DOM” is listed as 10 Days but the “PMP is listed as 100 Days. If the seller does not relist their home for 30 or more days form the expiration of the previous listing then the “PMP” resets to 0 Days. This was done to better disclose the actual days on market to agents, appraisers and buyers. You see, some agents and brokerages would remove or withdraw a home from the market because the “DOM” was high. They then put the home back on the market as a new listing with a new MLS number. This then showed one day on the market instead of the actual time on market. Today it does not matter whether you have “PMP” or “DOM” on the MLS. Every home in Berks County has a public record. Part of the public record is the property marketing history which shows any and all information relative to when a home was listed, for how much and if it sold (and for how much), expired or was withdrawn. The public record marketing history goes back approximately 15 to 20 years. This information is readily available to a prospective buyer and can be found on real estate home search web sites like Trulia.com and Zillow.com. A home that has been on the market an excessively long time can get stigmatized. In other words, buyers may feel there is something wrong with the property, it is overpriced or both. One thing few consider is how lenders look at days on market from an appraisal value standpoint. If the “DOM” are high in a neighborhood the lenders can rate the area a high risk or decreasing value zone. Yes, “DOM” are considered a factor in home appraising. Too many homes in Berks County are listed high and later sell for less than market because of high “DOM” The best way to avoid a high “DOM” is to vale your Berks County home correctly. This can be accomplished by working with a “WER”…Well Educated REALTOR®. Didn’t think I would let you drift into the holidays without at least one selfless plug did you?

Jeffrey C. Hogue