Days on Market (DOM)

 

The Average Actual Days on market are critical to a seller for several reasons:

·         It's important for you in setting realistic expectations about the time needed to sell your home

·         It will help you evaluate any offers that come in and make an educated decision about whether it's advisable to you to wait for another offer or take what's on the table

·         As a seller if you know the Average Actual Days DOM for your market (or, better, yet, for your neighborhood), with this accurate information you will understand the market and we will be able to guide you through the process like a professional – to sell your home in the least amount of time for the most money!

 

Problem with DOM Statistics:   Most MLS databases have a much-manipulated DOM number which is invariably skewed low. However, it is possible to determine the actual DOM for your market by using the absorption rate to calculate the true DOM for your market area. Here's how you get the real DOM:

·         First we find out how many homes sold in your market last year and how many are currently on the market. For example, if 10,000 homes sold last year, and there are currently 5000 on the market, what those numbers indicate is that the inventory turned twice last year (10,000/5000 = 2.0).

·         Second there are twelve months in a year, and 12/2.0 = 6.0, which is the absorption rate, meaning that the average time actually on market is 6.0 months.

·         Third we convert the absorption rate to days on market, you simply multiply this last number by 30 (6.0 x 30 = 180).

 

Why Use Absorption Rate:  If you figure DOM this way, you'll eliminate all manipulation in your market by builders and agents who re-list stigmatized homes, which of course are those homes that have picked up a negative image due to their excessive time on market.

 

Standard Deviation (STDEV) for DOM

 

Here's what DOM Standard Deviation means in selling your home:

·         Let's assume that we have calculated the standard deviation of the DOM is 53 days.

·         Let's further assume our calculation of the absorption method indicates that the true DOM is 186 days.

·         Add one standard deviation (53 days) to your average of 186, and you have 239 days.

·         Add another standard deviation, and you have 292 days.

 

The results are:

·         You have a 50% chance of selling you home in the average DOM.

·         If you add one standard deviation, you take the probabilities to 84%

·         If you add another standard deviation, it's 93%

·         Another standard deviation would elevate the probabilities to 96%, then to 98%, and so on.

 

What this means to you as a seller is that the statistical probability of selling your home in a few days is nil, and that in reality he should expect the process to take the average amount of time plus at least one standard deviation. Based on the illustration above, if this were your Market Area you have a 93% probability of selling your home in 292 days, using the typical pricing approach.

 

An experience agent is one of the most valuable tools in today’s real estate market.