Speak Real Estate-ese: A Quick Education for First-Time Buyers, Part 1
Super Bowl fever has afflicted the country. And we see a connection to our buyer’s education series in America’s favorite game: after all, the Super Bowl of your consumer life is buying a house. Few of us will ever make a bigger purchase. But just like playing football (or watching it, for that matter!), you can’t win if you don’t know how to play the game. And part of playing the game: knowing the lingo.
For Instance, What the Heck's a DOM?
One of the most used terms of this lingo is “DOM.” The acronym appears in the information about a house for sale, but the average MLS listing doesn’t include a key to such acronyms, which can frustrate first-time buyers. But it’s not actually a secret code, just a short hand way to write “days on the market,” or, in other words, how many days have passed since a particular home went up for sale.
From there, the measurement gets more complicated. Sometimes, when a home has been sitting for too long, a seller will pull it and then re-list it, perhaps at a new price or with a new agent. For a home like this, there are actually two measurements then: ADOM (Active Days on Market) and CDOM (Cumulative Days on Market).
Say for example a certain house sits for 35 days on the market, at a certain price, but never attracts a buyer. So, the seller takes it off the market and re-lists it next day, but cuts $20K off the price. By listing it as “new,” the seller avoids both the stigmas of a stale listing and a price reduction, which can be read by buyers as signs the seller is anxious to sell and thus at a disadvantage to the buyer. Now, with this “new” listing, after 10 days, the ADOM would say “10 days on market,” but the actual CDOM would be 45 days. And, in some cases, buyers wouldn’t see the latter number and wouldn’t know about the CDOM if they’re tracking the home on their own. Fortunately, Realtors always have access to that information and can make it available to their buyer clients.
So We Know What It Means, but What Does It Signify?
Another complication with DOM is how much weight to give that number: We now know what DOM means, but as buyers, what does a higher DOM really signal to us?
Adam Rosal, a ZipRealty agent in the Los Angeles, San Fernando Valley area, writes that the DOM is “one of those factors that need to be considered along with other factors like type of sale and price,” but at the same time, he cautions “DOM is a variable that can be easily misunderstood.” His main point is that a high DOM doesn't always mean a desperate seller, or that there is something wrong with the house.
4 Reasons for High DOM Figures We May Not Have Considered
Buyers might easily make the mistake that a high DOM means a home is ripe for a low offer. But Adam points out at least these reasons for high DOMs that don't translate into an easy buyer experience.
1. A short sale will easily have a high DOM and show active because the listing agent is waiting on the bank to respond to offers while still soliciting the property for more offers. Also, a short sale with a high DOM would be a little alarming as they should be approaching a foreclosure date.
2. A standard sale with a high DOM might mean the seller is a bit stuck on their asking price.
3. This time of year with the holidays just finishing, the market slows down a bit (at least in some areas), so there’ll be a lot less buyers going out to look at homes.
4. A final consideration , one we’ll follow next week with hard data, is that the DOM for a metro isn’t necessarily indicative of the DOM of a particular city (or even street!) within that metro. So, if you’re interested in a special location, you’re better off studying the local comparable sales with an agent who lives and works in that location, rather than relying on highly generalized information.
With the right training (and we hope these blogs are part of it), the right team, and the right coach (your agent!), you’re on your way to realizing your dream of owning a home. Next week we’ll go deeper into the DOM, as well as other common lingo you need to speak real estate-ese and to succeed in game of homeownership.