Buyers always want to know, "how long has that house been on the market?" Early in my career, I didn't think that it mattered, but I've learned that it depends on what type of market we're in, the type of property (resale, short sale, REO, HUD property), or the price point of a home to know the negative and adverse effects of how long a home has been on the market will affect it's sale price.
IN A SELLERS MARKET (Average of 90 days on the market or less)
- Resales tend to be priced above fair market value so a longer time on market usually means a less desirable property. This is a sign to the buyer that if the home has been on the market for a while that its either WAY overpriced or has obsolete/quirky features (see blog "What makes a home a BAD buy" ) that don't appeal to the masses.
- Foreclosures/REO's/HUD properties tend to be priced at fair market value or below and sell quickly so a newer listing will garner a lot of attention and drive the price up in some cases. Having a foreclosure with a lot of days on the market could mean numerous repairs needed that lender is unwilling to fix or a very undesirable area that not even price will lure buyers in.
- Short sales in a seller's market are usually priced very close to if not at retail and are on the market 3-6 months due to the lengthy short sale process. If a short sale is on the market over 6 months in a seller's market, this is a sign that the listing agent is not very efficient with the process or the seller's lender is being stubborn.
IN A BUYERS MARKET (180 days plus average days on market)
- Resales are usually priced at market value and above due to competition, but in our current market here in Atlanta, they are usually overpriced due to surrounding property values and the sellers owing more than what the home is currently worth. Seeing a 'stale' resale means that either the sellers are prime to explore doing a short sale, lease, or will withdraw the listing and wait until values rise.
- Foreclosures are priced VERY aggressively in a buyer's market so seeing a stale foreclosure will mean extensive repairs, title issues, or its grossly overpriced. Sometimes you may see a bank with overpriced foreclosures that will linger until the bank reduces the prices within reason. I see this quite often in the $250K+ range where lenders cannot fathom that these homes are now worth $80K-$100K less than they were originally purchased for in favorable neighborhoods.
- Short sales are pretty much priced like foreclosures in a buyer's market so seeing a stale one will either tell you that the current lender is wanting more money to satisfy the seller's loan obligation than the current market value will allow. More short sales go into foreclosure in a buyer's market because of the sticker shock from the seller's lender of the depreciated values.
LUXURY HOMES
Homes over $500K are no stranger to 180+ days on the market. Homes $1M+ are usually on the market at least a year only because the number of people that purchase these homes are in the minority of the group of home buyers in a market at any given time. Another reason these homes sit on the market longer are the aesthetics and loans available. Heavy customization make some homes EXTREMELY hard to sell (google Dean Gardens!) These discerning buyers have tastes of their own and may not want the expense of getting rid of the previous owner's bad decor. The ability/requirements to qualify also play a part in today's market as lender's require more down-payment along with the absence of attractive Jumbo Loan rates. However, the luxury home market continues to maintain steady growth due to these buyers not being as adversely affected with the current economic state and a steady influx of all cash buyers.
WHAT DOES THIS ALL MEAN?
To sum it all up,knowing the fair market value of a home cuts down to the chase as far as determining what to offer on a property. At the end of the day, no matter what a house is priced at, you should know how much is too much to pay and how low you can realistically bid and have a shot. If you (or your agent---heaven forbid!) don't have this information, you're just making guesses.
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