Days on Market – Caveat Emptor
This report is part of a series looking at days on market and how this data influences buying and selling decisions. As always, our "terms of use" apply.
The number of days a property sits on the market, days on market (DOM), is the ultimate valuation test for a property and more broadly it’s a component of overall market health. When the DOM start to rack up, there is often a perception in the market place that there is something wrong with that particular property. This drives some sales agents to step over what we see as an ethical boundary and manipulate DOM data.
To be clear, higher DOM doesn’t necessarily mean that there is anything wrong with a property, nine times out of ten it’s an indication that the property is overpriced. Additionally, as you move up the price spectrum in a given market, you would expect that the DOM will be higher than lower priced properties in the same market, this is a function of market liquidity, not necessarily mispricing.
What buyers need to know
Looking at the DOM doesn’t always tell the whole story. The Multiple Listing Service (MLS) which serves the greater Boston area allows for DOM to reset to zero if the property is removed from the market for 60 days or more. It’s very common to see a listing canceled around Thanksgiving and then reappear on the market in late January as a new listing with zero DOM. This scenario is completely within the MLS rules.
But there’s a more underhanded way to manipulate DOM data in the MLS system. Say a sales agent is marketing a condominium, unit 3 at 100 Main Street, and it’s been on the market for 200 days. The agent cancels the listing and the next day re-enters the same condominium unit into the MLS system as 100 Main Street, unit Penthouse. Magically, the DOM clock resets to zero by changing the property description. Examples:
212 Commonwealth Ave, unit 2 ($8,495,000) – Listed on 10/30/2020, Current DOM 18
From 3/2/2020 – 10/27/2020 (239 DOM) unit was “penthouse”
From 5/6/2019 – 2/27/2020 (297 DOM) unit was “unit 2”
TOTAL DOM = 554
4 West Hill Place, unit 1 ($4,250,000) – Listed on 11/5/2020, Current DOM 12
From 7/7/2020 – 9/18/2020 (73 DOM) unit was “unit 4”
TOTAL DOM = 85
250 Beacon St, unit no. 19 ($6,200,000) – Listed on 11/9/2020, Current DOM 8
From 2/24/2020 – 10/15/2020 (234 DOM) unit was “unit 17&19”
TOTAL DOM = 242
These examples violate the local MLS rules. It’s important to understand that MLS systems are privately owned corporations, no different than the NASDAQ or the New York Stock Exchange (which is now owned by the Intercontinental Exchange). Every MLS system lays out their own rules and regulations that their members are expected to adhere to. MLS systems enforce their own rules and regulations, in essence they self-regulate.
Deliberately manipulating data that consumers rely on to make major financial decisions raises serious ethical questions in our book. In the highly regulated investment industry, if a participant engaged is this kind of conduct, at best they would be barred from the industry for life, and would likely face civil and possibly criminal consequences. The good news is that manipulating MLS market data is not common, but as illustrated by these recent examples, it does happen.
The repercussions of manipulating DOM extend beyond the individual properties in question, DOM data feeds into local and regional market data. When DOM data is artificially capped, it creates the appearance of markets that are more liquid than they actually are. Liquidity is an important barometer of any market’s health, liquid markets are healthy markets.
When it comes to real estate, Massachusetts is a buyer beware state which makes it of paramount importance that buyers and sellers alike work with a broker who has a deep understanding of the fiduciary duty they owe to their clients. Feel free to contact us to learn more about our fiduciary commitment.