“As part of our marketing activity, we send emails to property owners who have been on the Multiple Listing Service (MLS) for more than 180 days,” I remember hearing my investment partner tell one of the real estate agents with whom we were cultivating a partnership; This was the presentation meeting with his broker. At that time, we had been working with his connection to the real estate firm for only a few months. Now, it turned out that the office’s newly hired broker was an experienced investor-aligned real estate agent and the presentation was prepared.
We were surprised as new investors when the broker laughed at this statement. It was, after all, a piece of “common wisdom” for those involved in the sport of real estate investing that my partner had just introduced. The broker smiled and said, “No real estate agent worth their salt will let a listing exceed 90 days on the MLS. Days on Market (DOM) entries are unreliable. If you see something that is older than 90 days, it means either the real estate broker doesn’t know what he’s doing, or the real estate agent and property owner don’t care or really don’t need to sell it.”
Every listing on the MLS carries a DOM field that tells the viewer how long the property has been listed. However, publicly traded real estate agents have the ability to “relist” or “re-age” a listing of properties. This practice is not supposed to exist, but it is prevalent enough that it has been written up in magazines and further discussed on local television news programs by their consumer reporters as an existing and controversial practice.
This practice affects the buying community in one of two ways. First, this new “age” is added to the average that is calculated for the local area DOM number, which affects the “true” value of this measurement point. So when local real estate market data is presented, the DOM figure may not be reliable. Also, and more specifically, buyers looking for a specific home should be careful. A new list can be an old list. It’s that easy. The “hot” new listing with its exciting price could, in fact, be an old listing that was outdated and sitting dormant in a competitive market at too high a price. Instead of simply lowering the price, which would attract bargain-oriented investors or simply make the property appear ‘weak’ to a prospective buyer, the listing has a renaissance.
For the investor, this means that it’s not only smart to scan weekly listings in your target area that are less than 10 days old, it’s necessary. It also points out, if you’re an area-focused investor, that you should do your homework with the help of your real estate agent (who has access to MLS) on every new property in your area that meets all of your other requirements. Properties with DOM counters older than 180 days may not indicate at all that you will be dealing with a motivated seller. Never approach a listing like this as a foregone conclusion that the owner will be happy to hear about your offer.
On a related note, I found it interesting that the broker had placed these listings in the “time waster” category in their 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 showing 259 days on the market. Maybe. If every real estate agent is giving that advice, then maybe only inexperienced “investment newbies” are working on these leads because they just learned this strategy.
Do not completely ignore these clues. work them. Stay tuned for the answer. If there’s a response, and it’s a counter to your (probably) low offer, then it’s time to find out if there’s a deal. Listen and react with your growing wisdom. Use your development skills to find out if the seller is really motivated, or if he really doesn’t care and is just waiting for your asking price to magically match. Knowing what to expect from this category of owner is to your advantage.
You now have a basis for looking at listings you discover are less than 10 days old in a new light. She now knows how to research each new listing, ask pointed questions, and perhaps start talking to neighbors or the local mail carrier about properties that capture her interest.
In short, 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 reading is simply a tool, and you need to understand how the ‘measuring’ is done. After all, YOU are the person doing the final analysis. Once the investor proceeds with the awareness that property listings can be given a breath of new life, interpreting the meaning of your MLS profile requires a cleverly modified approach.
I have always found reincarnation to be a fascinating concept. I thought that only people and animals were involved in reincarnation. It seems, after all, that he was wrong!
