When sellers go to list their home with a real estate agent, they will usually get reports with the average DOM in their area. DOM, short for Days on Market, is a simple metric. The Days on Market is the time between the house going active for sale and the time that there is an accepted contract on it. We’ll write about how sellers use Days on Market in another post, but for now, let’s look at it from the perspective of the buyer and how an agent might negotiate a purchase of a home.
As of this writing, the average days on market combined in Saint Louis County and Saint Louis City is 35 days. Older logic is that anything less than 60 days is a seller’s market, and anything more than that is a buyer’s market. As this days on market is the average for the St. Louis metro area, it is somewhat biased to the long side. Indeed, when looking at Webster Groves for the month of July, the days on market was only 23 days.
As a buyer, when you look at a Zillow, or Realtor.com, you won’t see the days on market for a particular listing, and that is because it might give you an advantage that these sites don’t want to give to buyers for free. I can guarantee when you work with an agent from Deerwood Realty, you will get this information.
If we know that the average days on market for Webster Groves is 23 days, and we are looking at a house that has been on the market for 70 days, something is wrong. This means that all available buyers have passed on purchasing for more than two months. 9 times out of 10 this is an indication that the listed price of the home is too high. This gives no insight into the number of offers received. We do know that the offers, if there were any, were not high enough for the seller to accept the offer.
As a buyer in this situation, you really have only three strategies. Here they are.
- Write an offer at asking price. If there is some new information that has come to the market, perhaps a similar house has recently sold since the home was listed, and you want the house, come in at full ask. You will likely get the house under contract.
- Write an offer below asking price. The rationale is simple. The house hasn’t sold for a long time at the current asking price. You and your real estate agent have looked at comparable properties and settle on a price that you feel is reasonable based on the research. You may or may not get the house at the price you have submitted. Sometimes, what happens in this case is you agree on price, but the subsequent building inspection shows problems with the house that you aren’t comfortable with taking on at the agreed to price. If your agent pulls a listing history, and the house keeps going under contract but then fails to sell, you may see this type of behavior.
- Wait to write an offer until the price drops to your own valuation. In my experience with buyers, this never happens. There are some basic reasons for this. Every buyer wants to buy a house feeling like they got a fair deal. When they see a house is for sale for a long time, they think that something is wrong with the house, because it hasn’t sold. They decide with their agent to submit an offer lower than they would usually buy this same house for. The owner naturally refuses, and this is what actually can occur in option number 2. The logic makes sense to the buyer, but it causes the seller to harden and not negotiate to a number both can agree on. Also, by the time the price drops to your new price, someone else has already negotiated the sale price as low as the seller is willing to go.
My best advice is that when you like a house, and it’s been in the market for more than the average days on market is to submit an offer at a valuation you are comfortable with. I’ve never heard of anyone coming in at full ask in this situation, and in option number 3, your likelihood of success in getting the house under contract is less than option #2. The worst thing that happens with the second option is that the house stays on the market longer and you find a different home to purchase.
There are other factors involved with submitting an offer and actually getting the house under contract. The above should be taken as advice in general. Each buyer and seller have their own motivations, and so it’s important to work with an agent where you feel comfortable enough to discuss your price motivations as well as being comfortable with the agent’s explanation of their rationale for the offer they present. If you are uncomfortable communicating with your agent, it’s unlikely you will feel good about the process of buying your new home.