Speak Real Estate-ese: A Quick Education for First-Time Buyers, Part 2
Last week we got you started acquiring the language of home buying and selling with a lesson on “DOM,” or Days on the Market. The upshot of the lesson: we can easily enough understand what “DOM” stands for, but what the actual numbers signify to you as a buyer is another story.
As ZipRealty agent Adam Rosal confirmed, DOM data is "one of those factors that need to be considered along with other factors like type of sale and price." But the numbers, generally speaking, can’t tell us as much as we might hope. For illustration, let’s look more closely at the folly of trying to use a particular metro area’s average DOM to predict whether sellers there are hungry for buyers.
Say for example we’re thinking of looking for a home in Portland, OR. So, tech-savvy buyers that we are, we start with research on the Portland metro area. Portland’s MLS (Multiple Listing Service) data show the tri-city metro’s average DOM was 142 days in December (3 days less than the recorded December DOM from a year ago).
Given such figure, we as buyers might feel confident that Portland is the market for us: sellers who wait that long to sell will be thrilled to see us, right? And we can low ball offer and be accepted! What are we waiting for?!?!
Hold on there, tiger. That DOM average is for a metro spanning 2 states, 3 major cities, and multiple smaller cities, towns, neighborhoods, streets and addresses. Every home has different conditions that contribute to its individual DOM, so studying the metro-wide data, while interesting for comparison and broad understanding, isn’t very useful on the micro-level.
Here’s an example, again from ZipRealty’s own data. We track the DOM for each city we represent, and since we’ve already mentioned Portland, we’ll stay there to look at these numbers. Note that in the table, only the top 3 highest and the 3 lowest DOMS, and their respective cities, are listed. In between the numbers vary, but descend down to the bottom 3 numbers.
Note that in the cities with the higher DOMs, the average selling price is actually higher, not lower, than those places with lower DOMs, so the correlation between a high DOM and an easy low ball offer is, sadly, a faulty one. Also, we might think that low inventory in an area skews the DOM, a logical supposition since if there are fewer homes than buyers, those homes will get snapped up fast. But note in the Portland example that the lowest number of units sold (which may or may not correlate with low inventory) is in Boring, OR, which also has one of the highest DOMs.
Okay, so you focus on the house itself.
No need to go so macro if we’ve found the home we’re interested in: that home will show its personal, unique DOM on its MLS listing page. But even here, without inside information, a high DOM won’t tell you as much about the house as you think. High DOMs can mean:
- Short sales or imminent foreclosure
- An unreasonable seller whose not budging off unrealistic pricing
- The house fell out of escrow for some reason and is back on market
- Seasonal downturn rather than a fault in the house itself
- The house has major problems
So how can you know? Luckily, your licensed Realtor has that inside info you need. Accessing records we can’t, our agent will find out why the DOM on a house is as high as it is, and can advise us on our offer accordingly, or even steer us away from the house completely. Remember, buying a house is the Super Bowl of our careers as consumers. With this likely being the priciest, most profound purchase of our lives, let’s not get tackled by real estate-ese when we can rely on someone who practices with that language every day.