One of the many real estate statistics published by real estate boards and associations (like the Kitchener Waterloo Association of Realtors – KWAR) is “days on market”. The number of days houses take to sell is suppose to be an indication of the strength of the market. This statistic is also often used by homebuyers and real estate agents as a guide to how aggressive their initial offer should be. In theory, the “days on market” statistic should reveal a lot about the house for sale, the neighbourhood and the real estate market as a whole.
The problem is a common practice of “re-listing”. In Kitchener Waterloo, if a listing does not sell in 60 days, agents are permitted to deactivate the listing and then reactivate it the next day. That way, the listing appears to be new on the market as the “days on market” counter is set back to zero. It will come up in client’s automatic notification feed as a new listing. We can do this over and over again every 60 days and say when the house does sell the third time round, 5 days into it’s third listing cycle, it will be reported as sold in 5 days, not 125 days as it should.
Reporting a home selling in 5 days has consequences. It skews the data and this data is used by real estate boards and new media outlets to report what is going on in the local real estate market. Home buyers and home sellers are getting the wrong information from what should be trusted experts and they are making decisions based on this faulty information.
For example, let’s say you are a home seller. You’ve done your research and you know that homes in your neighbourhood are selling in 21 days. When you’re house doesn’t not sell in the first 21 days, how willing are you going to be to take your realtors suggestion to reduce your price? Pretty willing, I think.
Another kind of scenario may play out for home buyers. With statistics telling them that homes are selling fast, they may be eager to rush in with a full price offer instead of taking a more cautious and thoughtful approach. You’ve jut broken one of my 365 Rules about Real Estate – “Never be in a hurry to buy”.