Days On Market (DOM), Cumulative Days on Market (CDOM), and What It Means to a Buyer
When it comes time to purchase a home and negotiate an offer there are numerous things to consider. One piece of data that is often misinterpreted by home buyers is Days On Market (DOM) or Cumulative Days On Market (CDOM). DOM refers to the last number of days since the property has been listed, and CDOM is the total cumulative days any agent has had this property on the market. Once a seller's listing has expired or is cancelled and is re-listed, the DOM clock is reset. However the CDOM is not reset (unless the seller waits 90 days before re-listing). This gives transparency to buyers about the true length of time a seller has been trying to sell the property.
The CDOM in the Seattle area's hot market is important information for potential buyers. Many (if not most) sellers will work with their listing agents to set a specific date to review offers, if any. This is where strategizing with your agent is critical! Sellers will often set a “offer review date” a week or two from the listing date (sometimes it's just a few days!). Sellers may sometimes move up this review date if enticed with a very attractive offer, but generally they will not. This information is located in the NWMLS Agent Remarks and is not usually visible to the public, but your broker can find it out for you.
While CDOM can be a useful bit of information for home buyers, bear in mind there is never a single data point that should ever be used exclusively to assume anything when it comes to real estate. There may be very good reasons a property has a long DOM or CDOM that do not reflect negatively on the property itself. A good example would be a family event, like a wedding or a death that would persuade the seller to cancel the listing for a period of time. Or a previous buyer got “cold feet” in the middle of the transaction and backed out with no concrete reason related to the property.
Another example is a home in a hot seller’s market, like ours in Seattle, that is new to the market and also priced right at market value. If the seller is willing to take the first offer, this home will probably sell very quickly. Some sellers may find the offer they took right away is not able to perform or perhaps that buyer may have over-reached their capabilities for some reason. So it comes back on the market, but meanwhile the CDOM clock has been ticking. At first glance buyers may think there is something wrong with the property when there is not.
On the other hand, if the seller's original pricing strategy is to price the home 10% or more over market value, it is quite possible you will see that home languish on the market unsold, or perhaps even need to be reduced, creating a longer than average DOM.
As a home buyer it is helpful to know what the average DOM for homes in whatever community you are looking in. It's also important to look at recent List-to-Sold ratios to get a handle of how aggressive you will need to realistically be in order to get the home you want. Your agent should be able to supply this data easily. It will help you to gauge the popularity of given homes in an area as well as give you some insight into how you may wish to structure your offer. Your agent may be able to clarify information about specific properties if he contacts the listing agent and asks for information.
The Home Seller’s Point of View Regarding Days on Market
Home sellers tend to be less likely to negotiate price when a home first hits the market. They are confident that their home is worth every penny that they are asking for it. Usually the first week or two of a listing will see a high showing activity if it is in a high-demand and low inventory area. A seller's confidence will remain high for the first week or two, depending on the feedback given to them by the listing agent. And therefore, a home seller will generally be quite firm on their price.
That's usually to give all potential buyers an opportunity to see the property and have time to make an offer to be considered. It is ALSO usually a way to entice buyers to do pre-inspections of the property in hopes of garnering offers that will not have an inspection contingency because the potential buyer has already competed it and feel they have a pretty good understanding of the condition and any faults of the home. If there are multiple pre-inspections of the home prior to the date the seller plans to review offers, it is unlikely that the home will sell for under the list price. After all, if numerous buyers are willing to spend hundreds of dollars (an inspection will often run $400-500 or more) before even making an offer, knowing they are in competition with many other buyers, then the price will likely escalate substantially over the list price, at least in Seattle. This is where having a knowledgeable, savvy, and experienced agent can pay HUGE dividends and make all the difference of whether you are in the running to get your offer accepted or not, and if you are getting the best deal you can without over-paying.
If you are making an offer on a home that has NOT had multiple pre-inspections done, or has a long DOM or CDOM, (perhaps it has come back on the market, or is less attractive for some reason (e.g. is on a busy street, has some challenges, needs some repairs, etc.) then you may have an opportunity to negotiate on price or conditions. If the seller has already moved and needs to get the property sold soon, that can work in your favor. But the best scenario is when the seller has no other buyers and you are there best and only option. If a seller starts to hit the 30-day or more CDOM in our market, their pricing confidence may start to wane, and they might start to consider a price reduction, if they haven't already. Of course, this is the best time for a buyer to negotiate. However, in our low inventory market these are few and far between, and are often the least attractive properties. That's just the reality that buyers need to understand and accept.
If you want to make an offer on a really nice home that just came on the market in a high-demand neighborhood, you will need to be prepared to pay over the asking price. Just make sure you have an experienced broker who can help you strategize and negotiate so you don't needlessly over-pay.