Buyers - Don't be Fooled by Days on Market
As we move further into the spring season, queries surrounding the number of days a home has been on the market increase.
If you're new to the home buying process, I'd like to encourage you to take a closer look. Not looking closer can cost you the perfect home. All kinds of things come to mind when a home has been on the market for a few to several months, your first inclinations could be steering you wrong.
One of the first things buyers think of is "it's overpriced" or "what's wrong with it?" and natural to want to make a low-ball offer. While seeking a discount is prudent, not understanding the listing's history could cost you the home you want.
Normally, this is a good guess, but it's not always true. It's best to talk to your buyer's agent and take a deeper look into the listing's history. Let's look at a couple of scenarios;
♦ House on B Street, priced at $200,000. This house has been on the market for 145 days, over four months. Other homes in the area are selling close to this price, a little over and a little under. You could assume there's something innately wrong with the property and make a low-ball offer, but upon your Realtor research you find out there were two offers on the home, each time sending the listing pending, but the finances fell through. This doesn't mean the seller will entertain a low offer from you, but these events did increase the days on market substantially. Make an offer that seeks a discount, but still respects the fair market value.
♦ House on C Street, priced at $250,000. This home has been on the market for 180 days, or six months. First, the seller keeps declining showings. After 45 days on the market the seller decides they want to create more appeal, and does some minor repairs or updates, but leaves the home on the market while declining showings. This is to raise awareness of the listing, but does extend the days on market. Second, this seller insists on "hanging around" during showings (not a good idea) and is travelling a lot or dealing with a loved one's situation or something similar, and again declining showings.
If you're tempted to make a low-ball offer, another, more appealing offer can come in and cost you the opportunity. Seeking a discount is fine, but due diligence and proper research is wise.
In both of these cases, days on market has nothing to do with the fair market value of the home and doesn't warrant making a low offer. Now, toward the end of a listing's "life" on the market, should the home be actually over-priced, it may be the right time to offer less (sometimes substantially less) than the asking price but closer to fair market value. There are several other scenarios I could write about, but I think you get the picture.
Consult Your Buyer's Agent
It's important to choose a good buyer's agent, look for reviews and testimonials, bouncing around from agent to agent isn't a good idea, shopping for an agent is like shopping for a home. Do some research. Once you have determined who you'll work with, consult with your real estate agent about properties of interest. If the home has been on the market for an excessive amount of time, find out why and get advice on preparing a offer for a greater chance of success.
If you're buying, work with a buyer's agent, (an agent other than the listing agent for that specific property). Why? Remember, the listing agent has promised to net as much as possible for the seller while a buyer's agent (a good one) will help you get the best price, point out defects and potential problems. A buyer agent's duty is to protect your best interests in a transaction.
Personally, I provide local market data on comps for my client to demonstrate the average asking price vs. the average sold price to help them determine a fair offer that saves them money.