October 30, 2020 | Days On Market
There are many acronyms and abbreviated words in real estate. Usually these word shortcuts are used to maximize the information on one listing page and allow you a little more room for added detail. The Toronto MLS only allows you to use a maximum of 463 characters in the remarks portion of the MLS listing. With this efficiency, there are certain short forms of words or phrases that are instinctively understandable to most readers. ‘Sq ft’ is easily understood to mean square footage. ‘Prop Mgnt’ is usually understood to mean Property management. There is one that is not very clear, however, up at the top right of Toronto real estate listings: DOM. I am often asked about this one. And it’s an important one.
DOM stands for ‘Days on Market’. I’m not sure it is very clear to most people, but the DOM should be something you should note as a buyer.
Why? Well, it tells you quite a bit. Simply put, the longer your DOM, the better chance you have of negotiating a better price. So, if you have a DOM of 60, then a Toronto property has been on the market for 60 days. Even in this current Covid market we find ourselves in, 60 days is a long very time to be on the market right now in Toronto. A longer DOM usually gives you more leverage to negotiate the more favourable price. Just keep in mind, a big DOM does not necessarily mean you are landing a deal. If a house has been on the market for 60 days, it may be the case that it was overpriced when listed. You may have an overzealous agent who doesn’t have a strong grasp on the current market, possibly listing properties at a higher price to either win the listing from other agents who promised a less ambitious price. If you are priced too high in a market where values are going up, the market may catch up to your ambitious price eventually. Still, the listing would be considered stale. People would begin to wonder if there is something wrong with your property after a certain amount of time. If it’s too high in a cooling market, then a high price won’t help you sell your property.
Now in some markets 60 days may not be such a long time. A few decades ago, it was common to take a longer time to sell than we do today. Same can be said in the future. If we go through a tougher market, properties could be on for a longer time than usual. This will be an advantage to a buyer.
Keep in mind a longer DOM may also be normal for a property that only attracts a very specific set of buyers. If you have a luxury home at $10 million, your number of potential buyers is very small. So, it may take longer to sell. A longer DOM would be typical here.
Now, let’s look what some of the shorter DOMs could indicate. With many properties in Toronto, particularly great houses in high-demand neighbourhoods, the list price is just the teaser price. That means, a house may be listed at $999,000, but if your seller is taking offers in a week’s time, then the sold price could sell for something like $1,300,000 if there’s enough competition and interest. Usually, if the strategy to hold back offers and have buyers compete on a given offer day will take a week or a DOM of 7 days. On rare occasions it can be up to two weeks (DOM of 14). But usually after a DOM of 7 to 9 days, there is a good chance that property will either sell in competition or be cancelled and re-listed a different price (often higher than the first list price) with offers now any time instead of a certain date. At this point, the buyer may negotiate down from that price.
One important caveat with DOM we should note: There may be a property with a DOM of 5 days, but it may have been on the market for a total of 90 days. So, if an agent lists a property, then cancels the listing after it’s been on the market for 85 days, then comes out a week later later and re-lists the property for 5 days, it will only have a DOM of 5. So, make sure you find out the history of the property. It may have a small DOM, but the property may have been on the market for a very long time. Make sure you or your real estate agent researches the past history.
In a nutshell, the faster a house sells, the higher the price. Long DOMs can mean opportunity for a buyer. But not always! Make sure you check the history of the property.
If you are a seller with a long DOM, then I would suggest you ask yourself why your property isn’t selling. You may need to reconsider your approach. Stale listings are not the best route to land the best sold price. Is it the market? The marketing? Your price expectations? I almost never think a long DOM is a good idea. If you’re not selling after a long period of time, you need to revisit your listing and sales approach and make some changes.