If a hot residential neighbourhood usually sees properties sell within eight to 10 days, a house that sits on the market into its fifth week is most definitely overpriced.
One real-estate metric that simply does not get enough use is “days on market.” It doesn’t appear on the public version of MLS, but will show up on the listing print-outs you get from your realtor.
The number of days that a house, condo, or even a commercial property has been listed provides buyers and sellers with insight into the property, the most important of which is the accuracy of the current price.
Different markets have different averages, so while 45 days on market for a downtown Toronto condo might sound absurd, it could be seen as a “quick sale” in Mobile, Alabama. I’ve had clients come from rural Ontario, where properties routinely take 180 days or more to sell, who accuse us of whining if our three-bedroom house is on the market for a whole month. But here in Toronto, where the average days on market thus far in 2012 has been approximately 28, buyers and sellers alike can use this metric to determine how a property is priced, and how to proceed with a purchase or sale.
Bearing in mind that 28 days is the average, if a hot residential neighbourhood usually sees properties sell within eight to 10 days, a house that sits on the market into its fifth week is most definitely overpriced.
From a seller’s perspective, you use this information to determine if and when to reduce your price. There will always be those stubborn sellers who say, “I know what my house is worth,” and they likely don’t care how long the property sits unsold. But for the most part, sellers take those five weeks on market as a sign that they’ve tried to get their price, and the market is telling them that it’s just not possible.
From a buyer’s perspective, the days on market might determine how, when, or how much to offer on a property. I’m currently embroiled with the listing agent and the seller of a west-end loft that has been on the market for 58 days with no price reduction, in an area and a building that should only take 14 to 20 days to sell. My logic is that if the property was worth anywhere close to what they were asking, they’d have sold it a long time ago. Try explaining that to an inflexible seller who also happens to be getting poor advice from his listing agent.
The bottom line for a seller is that as the days on market pile up, the leverage they have decreases. It’s easy to hold out for the full asking price when you can say, “We’ve only been on the market for two days and we’re not taking anything less than asking,” but you can’t make the same argument when the property has been listed for two weeks. You lose leverage, and the buyer for your property knows it.
As a buyer, you know that a logical, rational seller who wants and needs to sell his or her property is likely staring at a price reduction of about four to five per cent after 30 days on the market (otherwise, the price reduction would have no real impact). Keep in mind that the 28 days on market mentioned above is somewhat skewed by the properties that linger on the market for 10 months and are being completely ignored, as well as those in areas that typically take longer to sell, like outside of the central core. A month on the market in Toronto is a long time, and a buyer looking for a deal should identify those properties that are likely to be dropped in price, and those sellers who are losing all leverage as days go on.
I have long maintained that the top dollar comes in selling your house or condo between one to seven days on the market, after having prepped it for sale for two to three weeks. Once you get outside of the first week of the listing, buyers and buyer-agents start to say, “Looks like this property isn’t selling.”
As more and more inventory comes onto the market, especially in the downtown core, we may see that 28-day average across Toronto begin to increase. Maybe only then will we realize how good we’ve had things these past few years.
David Fleming is a Realtor with Bosley Real Estate in Toronto, and author of the best known real estate website in the city: www.torontorealtyblog.com. A constant thorn in the side of condominium developers, David’s sarcastic, opinionated, outlandish thoughts can be read daily, although for some people, that’s far too often.
