With the hot real estate market that the U.S. (and Colorado in particular) is in at the moment, we’re all seeing new insights on the industry every day — including right here in the pages of BizWest. As we head into spring and the market gets even busier, now is a good time to make sense of confusing real estate industry jargon and discuss what the data is really telling us when Realtors and brokers pull listings for buyers and comparable listings (comps) for sellers.
Sorting out ‘Days on Market’
The names of two common metrics that people in the industry look for — and what homebuyers and sellers generally see on real estate websites — are “Days on Market” (DOM) and “Cumulative Days on Market” (CDOM). While the “days” portion is easy to understand, the “on market” portion can make the terms’ definitions very different depending on the local customs of the marketplace and each unique property. As a result, DOM and CDOM vary across regions.
First, the amount of time a Realtor or broker has to enter the listing into the MLS is sometimes unaccounted for in the DOM data. Since entering that information might take a day or more, the number you see could be off by a little bit.
Second, you may see a very sellable home with a high DOM. It makes you wonder, in the unprecedented real estate market we are in, how the listing can state that a home has been on the market for a month or two when everything else we hear is that homes are being snapped up in a day. The listing agent and seller may choose to continue to market the property, even though it went under contract in two days. Why? While there are typically many valid reasons, the most common explanation for a home remaining on the market in a contingent MLS status is to seek a backup offer. In these situations, DOM will continue to accrue. Conversely, there may be allowances to market a property as “coming soon” in an MLS during a “no show” marketing period without accruing days on market.
‘Under contract’ versus ‘sold’
You may hear the terms “sold” and “under contract” used interchangeably. When a seller accepts an offer, the property goes “under contract.” Agents and sellers have many reasons why they might keep a property on the market while it is “under contract.” Contracts can have many different conditions, including “pending inspection” or “pending appraisal.” However, once the transaction is completed and recorded, the property is officially “sold.”
Letting go of ‘average’
Another common data point is “average sale price” or “average list price.” This metric is a very typical way to look at pricing. But while “average” is a common metric we use in everyday conversation (e.g., average age) or in sports statistics (e.g., a baseball player’s batting average), it may not be quite as useful depending on the property and its surroundings.
Since there are so many variables in pricing and property differences, we recommend looking at the “median” or middle number when it comes to home prices. The median is often less influenced by the extreme sales on the high or low end.
At this time, there is work being done across the country to simplify and standardize the language and data available in the industry. Consequently, a Realtor or broker remains the best resource to help homebuyers and sellers navigate these complexities and ultimately succeed in the market.
Jeff Bosch is the CEO of Information and Real Estate Services (IRES), which powers ColoProperty.com, a real estate resource for homebuyers. IRES is a regional multiple listing service based in Loveland.