What is Days on Market (DOM) in Real Estate?
DOM or Days on Market in residential real estate is a valuable statistic that tells us how many days a property has been for sale.
MLS systems track the amount of time a listing is on the market. So when real estate brokers put a new listing on the market, the DOM clock starts ticking from that listing date. In most MLS systems, the number of days keeps accumulating until the status changes to “pending.”
When does the DOM clock stop ticking?
The path from “for sale” to “sold” involves a couple of distinct stages. These stages show up in the multiple listing service under different market statuses. Once the seller accepts an offer, the MLS status will likely move to one of the following.
- Under Contract — Taking back-up offers continue to show. The seller has accepted an offer. The buyer is working to remove their financing and inspection contingencies. The seller is still willing to look at other offers if the first one falls through. The DOM clock continues to run in this case.
- Contingent — The seller has accepted an offer, contingent upon something else happening. This usually means that the buyer has an existing home they need to sell to buy your home. Their home may be under contract and waiting to close or it may not even be on the market yet. In this case, most owners will continue to market the property in hopes they will receive a better offer. If the sellers receive another offer, the first buyer usually has the opportunity to remove their contingency. If the buyer cannot remove their contingency, the seller may accept the other offer. The DOM clock continues to run in this case as well.
- Pending — Pending status signals the transaction is past the due diligence requirements. Therefore, the transaction is ready to close. This is the status that stops the DOM clock. Here is a very detailed breakdown of Pending Status.
If the contract falls out due to issues with financing or inspection, the home goes back on the market. In which case the total number of days on market clock keeps running. If the status was pending, the clock starts running from where it had previously stopped.
Resetting the Days on Market Clock
Most MLS systems will have a policy about what it takes to reset the DOM clock. The property will likely need to be off the market for a specific number of days (30 to 60) to reset the DOM clock.
This keeps both Home Sellers and Realtors® from re-listing the home to reset the clock on old listings.
Why Days On Market Matters
Real Estate Agents use the DOM metric as an indicator of the real estate market. Days on Market is also a good indicator of how well a home is priced. A longer DOM acts as a red flag and can affect the ultimate selling price.
The ratio between days on market and sales price is generally an inverse one. The length of time a home sits on the market, the lower the sales price tends to be.
Think of DOM as a desirability score, the lower, the better. When a home is on the market for a short period of time, the gap between list price and sales price tends to be close. In many cases, these homes sell for more than list price.
Here’s the scary part for home sellers, home buyers also use days on market to gauge their offer. When showing houses the question “how long has it been on the market” is a good sign the buyer likes the property. If the home has been on the market for a long time, the buyer might be considering a low offer.
The higher the days on market, the more questions the buyer has. Homes with above-average days on market raise questions like; Why hasn’t it sold? Is there something wrong with the house? And the worst question for a home seller is, “How low do you think the sellers will go”?
Chasing The Market
The Days on Market statistic is a great indicator of how well a home is priced. Competitively priced homes tend to go under contract faster than their overpriced competition.
Homesellers often try to pick a price that is above where the home should actually be listed. They say we can always drop the price if we don’t get any offers. The problem with this is that your best showings happen in the first couple of days on the market. The first potential buyers in will have been looking for a while. They may have even lost out on a few homes. They know the market and will jump on a home that is well priced. If the home is overpriced, they will most likely pass on the house. Buyers assume that since the listing is new, the sellers won’t take a lower offer; however, as As the DOM clock accumulates time, buyers start to wonder what the problem is.
The sellers eventually look at dropping the price but as the price drops, the DOM increases. This creates even more suspicion about the home. At this point, the sellers are chasing the market with subsequent price reductions. Chasing the market usually yields lower offers and selling for less than the sellers expect. Thus, pricing the home right from the beginning produces a higher net and avoids a big price reduction.
Home sellers generally see the highest net profit during the first 30 days on the market. But, again, this is why realistic and strategic pricing is so important.
Proper pricing from the beginning of the listing is the best way to generate buyers and offers. The idea is to price it correctly so that you can generate multiple offers. Multiple offers are the best way for a seller to get over the asking price. When prospective buyers see a home as a good value, they are eager to make an offer. The more offers you get, the higher the sales price is.
Is CDOM Different from DOM?
Cumulative DOM or CDOM stands for Cumulative Days On Market. This usually occurs when the seller changes the listing company. If they don’t wait the required number of days to reset the DOM clock, it keeps running. This results in 2 different types of statistics. DOM is the number of days the new listing has been active. The CDOM represents the cumulative number of days the home has been for sale.
If you are trying to reset the DOM clock, the listing agent should confirm local MLS guidelines. Real estate professionals will re-list properties in order to reset the DOM counter. This is smart for a stale listing, especially if the new listing comes with a realistic price.
Not understanding the rules about how long it takes to reset the clock can be a big mistake. Not waiting long enough can cause your MLS listing to keep track of cumulative days. This adds to the CDOM number from the previous listing. This could force you back into another even longer waiting period.
The best way to use the DOM statistic is to reference how long it should take an adequately priced home to sell.