When a real estate agents performs a comparative market analysis, often called a “CMA” with a prospective home seller there may be several variables to consider. One of them are homes that have recently sold and similar to yours. 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 and total days on the market to give you a comprehensive analysis of your home’s value.
One vital part of a good analysis is “Days on Market or “DOM”. Days on market should be broken down on sold homes that most resembles yours and periods between price changes. Only then can a value estimate be established and offer you a listing price the market will respond positively to. Simply put, “DOM” help home sellers avoid pricing mistakes other home sellers with similar properties have already made.
Home buyers consistently ask many of the same questions when shopping for a home, whether it’s in New Orleans, Louisiana or Honolulu Hawaii. A few that ranks at the top of the list are “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 and what an experiences real estate agent is listening for when representing or showing your property. The home buyer at this point is attempting to gather information that may assist them in buying a home at the lowest possible cost. What’s more interesting is that these questions are often asked before the prospective home buyer has visited your home.
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”.
Most multi-list systems have built in data known as Previous Marketing Period or “PMP” and here’s how it works for home sellers.
A home is listed by a real estate broker for 90 days and the home doesn’t sell. The seller chooses a different broker and the home is back on the market within three days. Ten days pass and the home hasn’t received an offer. Now the “DOM” is listed as 10 Days, but the “PMP” is listed as 100 Days. If the seller does not re-list their home for 30 or more days from the expiration of the previous listing then the “PMP” resets to zero days.
Previous Marketing Period or “PMP” was created to better disclose the actual days on market to agents, appraisers and home buyers because some real estate agents would remove or withdraw a home from the market because the “DOM” was high. They then would put the home back on the market as a new listing with a new MLS number. Doing so would show the property as one day on the market, instead of the actual time-frame and skewed some important data.
Unfortunately not all multi-listing services offer a “PMP”, but should be since it has become more and more important for the best possible “CMA”. Fortunately here on Oahu we have “PMP”.
In some counties in California and other parts of the county the data is considered so valuable that every home has it in public records. Today, many California county public records show every property’s marketing history, which includes information relative to when a home was listed; how much it was listed for; if ownership had been transferred; how much a home sold for and if the listing had expired or was withdrawn.
Some county records have already created a marketing history that goes back 15 to 20 years and the information is readily available to a prospective home buyer at websites like Trulia or Zillow. As data become more available, we’ll see a lot more of its use to home buyers nationwide.
A home that has been on the market for an excessively long time often is stigmatized. Take your real estate agents advise seriously when determining a fair listing price, but make sure they’ve done their homework before signing a listing agreement with a listing agent. A home that doesn’t have a good “CMA”, with all the appropriate analysis performed often leads to an expiring listing and will create data for future home buyers to access. It’s also likely most future home buyers will feel there is something wrong with your property, even when it was simply a poor analysis.
Lenders through the use of their appraisers use “DOM” when determining an appraisal value as well. If the “DOM” is high in a neighborhood lenders can rate the area as high risk or a decreasing value zone, so your areas “DOM” not only affects you the seller, but can affect your home buyer’s ability to get the financing they want or need to purchase your home.
It’s important for you as the seller to have access to this information and an agent who can easily explain their analysis to you when performing a “CMA”. Don’t be a disappointed seller who doesn’t understand how a “CMA” works and overprice your home, only later to sell it for less than market will bear, because of a high “DOM”.
The best way to avoid a high “DOM” is to select a knowledgeable and well trained real estate agent. Don’t make the mistake of selling your home as a “For Sell By Owner” or “FSBO”. More often than not a “FSBO will net sellers less than if they had hired a qualified real estate agent, simply because sellers seldom are aware of their home’s real value..
A SIMPLE HOME SHOPPING INSPECTION TOOL
Organizing your home shopping experience affords a wise decision making process. This simple home inspection tool makes your ultimate buying decision a smart one. To print this document click on “Open in New Window” located at the lower right corner; click on “File”; then click on “Print”. In the center of the screen you will have the option to “Create A Printable PDF of the Presentation”.