Buy That House: Negotiating Price and Days on Market

Buy that House: Negotiating Price and Days on Market

I met a potenial Buyer the other day. The type of home that he was seeking was very similar to one that I was going to be listing. I told him about this house, which was going to be coming on the market in about 30 days and for which the Sellers were going to be asking $300,000.

He said that he knew of the house and wanted to put in an offer today.

I told him that the Sellers would be thrilled. I suggested that we go to my office, write up the offer for $330,000, and get it to them today.

He was puzzled. I thought that you said that they were going to be asking $300,000.

That's right. They would be asking $300,000 in 30 days from now. But right now the number of days on market is minus 30 so they are, of course, going to ask for more than the amount for which they would be listing it. They will be asking for an extra $1,000 per day.

Huh? I don't understand.

I asked him if he had seen the house priced at $300,000 but after it had been on the market for 6 months, whether he would offer them full price. He responded that naturally he would offer less if it had been on the market for that long; the Sellers must be desperate by that time.

Well, so you understand why they are asking for more at this time. You must be the desperate one.

He was still not convinced, because he thought that they would be willing to accept $300,000.

Yes, he had a point, but why would that point not apply after 6 months? In either case, they wanted $300,000.

What do you think about using days on market in negotiating a price?

Is too much emphasis put on this statistic? Is their a formula for how to apply DOM to lowering (raising) the price?

Let's take the example above. How much should DOM count towards lowering the price after 6 months? Or, is this the wrong question to be asking?

Would it be reasonable to ask $60,000 less for this period of time on the market? What if the house is overpriced by $75,000? Just accounting for DOM when the house is incorrectly priced, high or low, misses the much more important statistic of value.

If two identical properties are placed on the market for the same price, but one of them is on the market for 6 months prior to the other, then if it is okay to offer much less for the longer DOM house would not that imply that the other house is also worth less? If it did not imply this, then the newer on the market property should ask for a higher price.

Typically, if a property is not selling, it is because the price is too high. If this is the case, then it is not DOM that is the reason for a lower than asking price offer, but rather, the fact that the house is overpriced.

While, it is typically too high a price that allows a property to stay on the market for extended periods of time, this is not always the case. For example, one may have put a house on the market prior to the property being ready. Maybe it needed cosmetic work, which until done, turned off all prospective Buyers, but once completed, made the property very desireable. Or maybe there was insufficient marketing as would be the case with a FSBO, in which case price would not have been the issue.

Days on market should be considered in determining price, but only as one part of an overall evaluation of all factors which are available for determining a reasonable offer.