How long before it sells? Hard to say

Providence Journal December 21, 2008

How long does it take to sell a house in today’s chaotic real estate market? Although potential sellers can get plenty of advice — most of it centered on setting a realistic price at the beginning of the process — there is no definite answer.

According to statistics collected by the Rhode Island Association of Realtors for the third quarter of this year, the median “days on market” numbers for all three categories of residential properties were up from the same period last year, including single-family and multifamily properties (88 this year, 72 last year), and condominiums (124 this year, 102 last year.)

Most agents agree that, at best, the statistic is a ballpark figure; overpriced houses will linger on the market much longer than average, and properties priced right will sell most quickly.

But even the president of the Realtors’ association acknowledges that the statistics have very little real-world usefulness given the way properties are listed and relisted when contracts expire, prices drop or sellers change real estate agents.

“It’s not a true statistic,” said president Paul Leys.

The “days on market” statistics may have had had a bit more meaning when market conditions were better. When the market was booming, many properties would be under contract well before a 60-day or 90-day listing contract would expire. But today, it is not uncommon for houses to sit on the market for many months, or even for more than a year.

Frustrated sellers are more likely to change agents and/or engage in multiple price cuts, actions that could result in their property appearing in the Statewide Multiple Listing Service as a “new listing.”

In the MLS, the “days on market” clock is reset when properties are relisted after a previous contract has expired, according to Donna McGinn, administrator of the Statewide Multiple Listing Service.

For example, if a house had been listed by Realtor A for 90 days, then listed with Realtor B for another 90 days, and the seller then signed a new listing contract with Realtor B for another 90 days and the house sold 15 days later, the statistics could show that the house sold in 15 days.

As a practical matter, however, real estate brokers and salespeople, and others who have access to the MLS database, can find the listing history of individual properties, including how long it has been for sale and how many times the price has been cut, Leys said.

Buyers who want to know this information can ask any agent for it. (Brokers and salespeople could risk losing their state real estate licenses if they misrepresent facts to buyers, even when they are representing sellers.)

“Buyers should know how long a property has been on the market,” Leys said. “It’s the reality.”

“If you want to track a property, an agent can provide that tracking for you,” said broker Ron Phipps, owner of Phipps Realty of Warwick. But he added that “as an agent, I want the timeline to be reflective of my listing agreement.”

Although the current system has its flaws, Phipps said, the days on market can provide information on how long a property takes to sell at a certain price point. For instance, if a property priced at $500,000 sat on the market for five months, but was relisted at $425,000 and sold within one month, the statistic reflects the marketing time based on the “real market price,” he said. “At 500, they weren’t really on the market in a realistic way.”

Phipps said the high number of distressed properties in today’s marketplace is affecting the average time on market. In the case of a short sale, in which the lending bank has to approve a sales price that is below the outstanding mortgage, many extra weeks of delays are common, he said.

“I’ve got a couple of properties that are upside down,” Phipps said, referring to a case when the mortgage is higher than the current market value. Problems and delays are occurring “not [due to] a lack of offers, but an unwillingness of lenders to work with us,” he said. It can take a lender 30 to 45 days to respond to an offer on a short sale, Phipps said, and that would count as extra “days on market.”

Leys and McGinn said the association has been thinking about altering the way relistings are handled. McGinn said the Statewide MLS may get a computer program that would automatically add plat and lot numbers to properties, and this would give each listed property an “individual identifier.”

Theoretically, if someone takes a property off the market for the winter, after it’s been on the market for 200 days, the “days on market” clock could stop when it was taken off the market and restart at 201 when it went back on the market in the spring.

But for Phipps, and for many agents working to sell real estate, the attraction of relisting long-marketed properties as “new listings” is the hope that this action will bring fresh attention from the market, even if the “new listing” moniker isn’t exactly accurate.

“My job as a listing agent is to sell the property,” Phipps said. “…At the end of the day, price really matters. If it’s well priced, it’s going to do well….The average time on market, frankly, is a distraction.”

Real Estate Bytes December 2008

It is December 11 and already after 6 pm. It is cold, rainy and dark. Like many Realtors across the country, I am at my desk putting in a long day to pull some transactions together, keep others together and identify some new business. (Sometimes I feel like a real estate transaction janitor). For almost 30 years, real estate has been my job and my passion. The cyclical economics of real estate remind me of the weather in New England. We have seasons: seasons of planting, harvesting, tending and hibernating. We have seasons of wet springs, warm summers, bountiful autumns, and raw winters. We know this in our bones. Furthermore, this economic winter is chilling us to the bone, but we will as we have get through this.

It has been a challenging year for everyone, with few exceptions. Whether you are a homeowner, a renter, a Realtor, it is a rare person who says this year has been easy. However, there are some rainbows out there if we look up. Interest rates are great. Think about it: You can obtain a 30 year fixed rate, conventional mortgage for less than 5.5%. The average price of a single family home has come down to under 218k, making housing more affordable for more families. Condominium sales were down this year, but average price went up a few thousand dollars. Additionally, the number of pending sales is up and inventory is down. There are some great deals out there and some investors are scooping them up. In short, these are encouraging signs in the middle of the real estate storm.

One important element is becoming apparent. There are fewer full time Realtors working now, but their value is becoming more obvious. Whether pricing, negotiating, staging, positioning, marketing, closing etc, professional experience will make a real difference. This is true with both the buying side and the selling side. Even in so called normal, traditional transactions it has become an exercise of immense patience, and persistence to complete the sale. Selecting a home is easy. Obtaining the financing and getting it closed is very challenging. Sellers are beginning to understand this new real estate reality, too: The interview questions have changed lately when making listing presentation. Pricing is still important, but many sellers are asking more questions: What do you do to stage? What is your marketing plan, specifically? The question of what is your experience has changed to how many houses have you sold this year? It is also strange as a couple of homeowners have asked if this is my full time job. Both buyers and sellers are asking about professional designations and what they suggest.

Finally, in a market with so many foreclosures and short sales, we are reverting back to a caveat emptor, buyer beware. These homes do not have completed seller’s disclosures. Often there is no water, heat or electric. They are very difficult to inspect and research. If those facts were not enough, add the fact that this category of property takes so much longer to negotiate and acquire. While there may be great opportunities, there are great challenges.

It is New England, so we will bundle up and get through the winter.