Real Estate Analysis - Is MLS 'Days on Market' Useful?

"As one part of our marketing activity, we send mailings to the owners of properties that have been on the Multiple Listing Service (MLS) for over 180 days," I remember hearing my investment partner say to one of the realtors with whom we were cultivating a partnering relationship, at an introduction meeting with his broker. We had, back at that time, been working with this realtor for personal injury attorneys Idaho a few months. His office's new broker, it turned out, was a seasoned investor-aligned realtor and the introduction was set up.

We were caught off balance when the broker chuckled at this statement. It was, after all, a piece of common wisdom for those involved in the sport of real estate investment that my partner had just presented. The broker smiled and stated, "No realtor worth his salt will let a listing go past 90 days on the MLS. Days on market (DOM) entries are unreliable. If you see something that is past 90 days it means either the listing broker does not know what he is doing, or that the realtor and the owner of the property don't care or don't really need to sell it."

Each listing on the MLS carries a DOM field that tells the viewer how long the property has been listed. Listing realtors, however, have the ability to "re-list" or "re-age" a property listing. This practice is, reportedly, not supposed to exist, but it is prevalent enough to have been written up in magazines and further discussed on local TV news shows by their consumer reporters as an extant and controversial practice.

This practice affects the buying community in one of two ways. First, this new "age" is added to the average being made for the local area's DOM calculation, affecting the 'true' value of this measurement point. So, when the local realty market information is presented, the DOM figure may not be trustworthy. Further, and more specifically, the buyers looking at a specific home need to be wary. A new listing can be an old listing. It is that simple. The new "hot" listing with its exciting price might in fact be an old listing that was stale and sitting idle in a competitive market at too high of a price tag. Rather than just dropping the price, which would attract negotiation-oriented investors or simply make the property look 'weak' to a prospective buyer, the listing has a rebirth.

To the investor this means that it is not only smart to scrutinize listings on a weekly basis in your target area that are under 10 days old, but necessary. It also points out, if you are an area-focused investor, that you should do your homework with the help of your realtor (who has the MLS auto insurance in Louisiana on every newly listed property in your area that meets all your other requirements. Properties with DOM counters greater than 180 days may not indicate at all that you will be dealing with a motivated seller. Don't ever approach such a listing as if it is a foregone conclusion that the owner will be glad to hear about your offer.

On a related note, I found it interesting that the broker had placed these listings into the "waste of time" category in his mind. As an investor, and one who likes to think 'outside the box,' I never say, "Never." Certainly, the owner and the selling realtor may not care about the property that is showing 259 days on market. Maybe. If every realtor is handing out that advice, then perhaps only inexperienced "investment newbies" are out there working these leads because they have just learned this strategy.

Don't completely ignore these prospects. Work them. Watch for the response. If there is a response, and it is a counter to your (surely) low offer, then it is time to find out if there is a deal. Listen and react with your ever-growing wisdom. Use your developing skills to find if the seller is in fact motivated, or if they indeed don't really care and are just waiting for their asking price to magically be matched. Just knowing what to expect from this category of owner is your advantage.

Now you have a basis for looking at the listings that you discover which are under 10 days old in a new light. Now you know to probe around on every new listing, to ask pointed questions, and, perhaps, to start talking to neighbors or the local mailman about properties that catch your interest.

In summary, one's information is only as good as the accuracy of the tool. This is true in the world of science, and it is true in the world of business. The DOM counter's reading is simply a tool, and you must understand how the 'measurement' is being made. After all, YOU are the person that makes the ultimate analysis. Once the investor proceeds with the awareness that property listings can get a breath of new life, then interpreting the meaning of their MLS profile requires an intelligently modified approach.

I have always found reincarnation to be a fascinating concept. I thought only people and animals were involved in reincarnation. It seems, after all, that I was wrong!

Joseph Callaghan is an active Real Estate Investor and Entreprenuer with 25+ years of experience in Business, Microprocessor Technology, and Sales.

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