What is “Days on Market” in Real Estate
by Dave Williams
In the real estate business, we toss around a lot of terms and unless you’ve spent substantial time preparing for your real estate transaction some of them are bound to go over your head.
Fear Not, for our new series of Real Estate Terms will help you sort them out.
The average Days on Market for homes and condos in Ottawa is 40 days. I say that like it should make sense to you, it probably gives you an idea about the market, bu what does it really mean.
- Days on Market (DOM); represents the number of days it took a home, from listing on the MLS® system to receive an offer.
- Cumulative Days on Market (CDOM); is the number of days a specific property was listed on the MLS® system to sell, regardless of REALTOR®, brokerage, price reductions, re-lists until it sold.
Days on Market is simply the number of days the home was listed for sale before an offer was accepted, example:
A condo in the Byward Market is listed for sale on Monday, several REALTORS® show it though out the week and on Sunday, after the open house the owners accept a conditional offer. (Days on Market = 6) Now the conditions specify an inspection, the buyers securing financing and the buyers lawyer reviewing the status certificate. These conditions will take a total of 2 weeks to complete, so 12 days later the buyers are happy with what their research has proven and firm up, the deal is done, it took 18 days to sell the condo…Days on Market =6
Or maybe they were not happy after discovering a special assessment and back out of the deal, but it works out because the day after the listing agent had received a back-up offer. (Days on Market = 7) Another 2 weeks of conditions and research go by, these buyers decide they are happy and firm up, the deal is done again, it took 32 days to sell the home…Days on Market = 7
But…the second buyers have a home to sell first, this is called a first refusal, so the property is still offered for sale for 2 more months (+60 days) before the buyers sell their home and firm up on the condo…Days on Market = 7
Alternatively the second buyers waited until the first deal fell apart before tendering their offer, the sellers now skeptical after the first deal fell apart invited them to do their inspection, certificate review and sell their home before they can come to terms. Once the second buyers were happy and sold their home they submitted a firm offer with no conditions, Days on Market = 92.
As a result of how offers are handled the number of Days on Market can vary wildly for the same property that sells in the same amount of time, and that’s not even counting whether the home was listed with a couple different agencies before hand.
Cumulative Days on Market is the true number of days the a home was listed for sale on the MLS® before an offer was accepted, example:
In the same example as above, but this time the condo in question is on it’s 3rd listing, they started with a For Sale By Owner company that also posted to the MLS, after 90 days they did not sell. Then they hired a discount brokerage that only charges a small percentage for the minimum listing period of 60 days. The third time around the hired a full service brokerage and this is where we catch up with our example.
In the first example the home sold in 6 day, the Cumulative Days on Market then for this property would be…156 CDOM. 90 days for the first listing, plus 60 days for the second listing and finally 6 days for the final sale.
Continuing with the second example, the second buyers with a back up offer on day 7 of the third listing would sell with a CDOM of 157.
In our third example where the second buyers took an additional 60 days to sell it would still only have taken 157 CDOM to sell.
Our final example is a scary reality, after waiting the extra 60 days to sell their home the second set of buyers buy the condo, Cumulative Days on Market = 217.
The same condo, that took the same 217 days to sell in Examples 3 & 4 could be described as 7 days on market or 92 days on market or 157 cumulative days on market or 217 cumulative days on market depending on how the REALTOR® handled and the offers. (Though in example 3& 4 the sellers were really gambling that they would find another buyer.)
And the 156/157 cumulative days on market in examples 1 & 2 respectively could be also described as SOLD in 6 or 7 Days!!! Even though it still took an additional 2 to 4 weeks before they could make that claim.
So with all that in mind I hope Days On Market is a little clearer to you.
Now when i tell you the Average Days on Market for Ottawa last month was 40 days, does it give you a clearer picture?