October 28, 2009
Quantifying The Impact Of Not Allowing Realtors To Reset DOM
It’s not a San Francisco based study, and we haven’t had a chance to review the research, but a plugged-in tipster directs us to a report on the impact of eliminating the ability to reset "days on the market" for a property’s listing.
In April 2006, the real estate listing service in Massachusetts adopted a new policy that prohibits home sellers from resetting their property’s “days on market” to zero through relisting. We study the effect of this new policy on single-family home sales along the Massachusetts-Rhode Island border, using homes in Rhode Island, which did not change its policy, as the control group.
We find that the policy change leads to a relative sale price reduction of around $11,000 for affected homes in Massachusetts. Homes caught in the middle of the policy change are the hardest hit; the sudden release of the cumulative days on market information lowers the average sale price by $21,500. Sellers respond to the new policy by reducing the listing price to shorten their property’s days on market.
A percentage rather than absolute impact might have be more meaningful. And while the San Francisco Association of Realtors does not prohibit the relisting practice, it is supposed to enforce a one month waiting period between relistings (unless the broker has changed).
As we originally wrote in 2006 when the National Association of Realtors responded to an inquiry into the practice:
We begrudgingly accept the practice, but to justify it by taking the position that "MLSs [and by extension their listings] are not considered advertising vehicles?" Sorry folks, but that’s an utterly asinine argument. And it’s disappointing to say the least.
At the risk of pointing out the obvious, consider any marketing materials, websites, or press releases that reference an MLS derived statistic such as average days on the market (DOM), or selling price to list price ratio (SP/LP). If any of the underlying data has been "refreshed," do these statistics really "present a true picture" and representation of the market?
Now back to 2011 Golden Gate Avenue and its official
370 37 days on the market and $595,000 under $1,000 over asking sale.
∙ Days on Market and Home Sales (pdf) [netinst.org]
∙ Sorry NAR, But No [SocketSite]
∙ From Flippy To Floppy And A Cliché For 2011 Golden Gate Avenue [SocketSite]
First Published: October 28, 2009 4:00 PM
Comments from "Plugged In" Readers
oh man, cue the haters...here they come!
with that said, let me remind you that a realtor's obligations lie with that of the person that has contracted them to sell their home. we owe them a fiduciary obligation to get them the highest possible sale price. if that means we have to pull it off the market for a month because they wouldn't listen to our sound pricing advice the first time around...then so be it.
now please, lets get on with the realtor hatefest that is socketsite.
[Editor’s Note: With regard to the fiduciary obligation we completely agree. With regard to how those actions can impact frequently quoted sell side statistics and market reports, we think it’s worth understanding (especially from a buy side perspective). And if "hating" is the only way you can rationalize it, then so be it as well.]
Posted by: anon$random at October 28, 2009 4:09 PM
until the "profession" starts behaving with the interests of clients (sellers and buyers alike), it will continue to draw the ridicule it rightly deserves.
same goes for altered listing photos, missing square footage data in listings, confidential sales prices, etc.
Posted by: andypandy at October 28, 2009 4:09 PM
and to andy pandy's unfortunate uninformed post:
agents that dont enter square footage data are generally trying to ward off a lawsuit, as square footage disputes are one of the most common ones. measure it yourself.
confidential sales prices aren't for the benefit of realtors. they're requested by buyers or sellers. we generally could care less.
altered listing photos...eh, you can keep that one.
Posted by: anon$random at October 28, 2009 4:12 PM
a majority of listings DO have square footage listed ... so why do so many Realtors(tm) want to be sued?
and why do the listings that lack square footage invariably turn out to be the most space-constrained properties... pure coincidence, right?
given your rather casual relationship with the truth (square footage & photos) and flippant attitude towards business partners (“meaure it yourself!”) why would anyone have anything but disdain for Realtors?
Posted by: blah at October 28, 2009 4:35 PM
For those without the time to read the white paper, here's the executive summary :
What I find interesting about the analysis is that there is a one-time over-correction when a DOM reset ban is imposed.
So when the local realtor association suddenly enforces a reset ban the unlucky sellers caught in that time period take a disproportionate dip in revenue.
Alternatively if the realtor association does nothing and allows DOM to continue to be a meaningless deceptive stat, the internets will continue its slow but sure campaign to usurp realtor associations as the gatekeepers of RE data (information wants to be free ya know) and make the "real DOM" of a property available to buyers. This has the effect of spreading the overcorrection over a longer period of time, affecting a large number of sellers but with a smaller dip in sales revenue per property.
So the best outcome for mere mortal sellers might be for SFAR to continue to keep its head in the sand thinking that they can control information rather than the association getting a spine and requiring its members to provide truthful and accurate DOM information.
Did I just say that ?
Posted by: The Milkshake of Despair at October 28, 2009 4:39 PM
I have a real problem when most of the Realtors ® that run the MLS systems know that “days on market” , “original list price” and “square footage” data in their system is often wrong and (despite the “code of ethics” that they never stop talking about) do nothing to fix the problems with bad data.
I don’t care if a slime ball Realtor ® wants to lie all day long, but since the Realtors ® that run the MLS do nothing to stop bad data from going in to the system the honest hard working real estate agents (who may or may not be Realtors ®) can’t get bad data and when I call to ask about 211 Golden Gate Avenue I’ll be told that it sold after 37 days on the market for $1,000 over asking sale (and I’m willing to bet that the square footage is probably wrong).
It will not be hard to write some code that only resets the “days on market” and “original list price” for a home after a sale and with the average real estate commission in the city over $30K I don’t think it would be out of line to require a 3rd party firm measure the square footage of every home (using specific guidelines) before it is entered in the MLS.
Posted by: FormerAptBroker at October 28, 2009 4:48 PM
A realtor's fiduciary duty to their client should not include the ability to manipulate the information buyers use to gauge the marketplace.
Posted by: EH at October 28, 2009 4:49 PM
If the price is reduced, it makes sense to me to reset the DOM counter - otherwise you convey the misleading impression that the house sat longer at the lower price.
I have no problem with a new DOM disclosure rule that accurately correlates list price with DOM.
Posted by: sanfrantim at October 28, 2009 5:24 PM
"A realtor's fiduciary duty to their client should not include the ability to manipulate the information buyers use to gauge the marketplace."
Hear, hear. This is yet another reason that MLS data should be more open to the public than it is now. Note that currently MLS does not permit previous listing prices to be made public after a listing goes inactive (that's why Redfin doesn't display them). The only purpose for that is for realtors to hide the ball.
At times, the way MLS is implemented seems pretty close to an anti-trust violation, although I certainly don't know if there is any case law on this.
Posted by: corntrollio at October 28, 2009 5:24 PM
We're not interested in your point of view because, well, you lie.
Posted by: Tall Guy at October 28, 2009 5:38 PM
"business partners" ?
Posted by: anonn at October 28, 2009 5:38 PM
We reserve the right to ascribe all hostility toward realtors. Our friends and neighbors who employ these statistics we who are not selling property profess to dispise are not at fault. -- haters
Posted by: anonn at October 28, 2009 5:40 PM
"If the price is reduced, it makes sense to me to reset the DOM counter - otherwise you convey the misleading impression that the house sat longer at the lower price."
I agree that buyers might misread the simplified two number (price, DOM) information as being on the market for a long time at a low price, but there's a better solution than simply resetting DOM.
I'd rather see the information fully broken out as in :
Placed on market : October 8, 2008 @ $1.4M
reduced : Jan 8, 2009 to $1.3M
reduced : Mar 8, 2009 to $1.2M
reduced : May 8, 2009 to $1.1M
reduced : Oct 8, 2009 to $850K
total DOM : 365
I'm sure that the computers that run sfarmls.com should be able to produce such a report easily.
Posted by: The Milkshake of Despair at October 28, 2009 5:42 PM
Can somebody please explain this to me?
Basically, realtors are complaining that if a law is passed that will prevent the resetting of DOM/CDOM, it would result in negatively impacting the value of homes by 21k?
Am I interpreting this correctly?
How does that make sense? DOM/CDOM should not impact the value of a home at all.
Posted by: Rincon Hill Billy at October 28, 2009 5:45 PM
Rincon Hill Billy wrote:
> How does that make sense? DOM/CDOM should not
> impact the value of a home at all. Please help.
Let’s say I move to San Francisco and find my “dream home” listed for sale.
Do you think I would offer more for the place if it “just hit the market” with a DOM of 4 or if it had been sitting for more than two years with a DOM of 822?
Most people that list a home for sale want to sell it and most people that want to sell something are more likely to make a deal the longer they try to sell it…
Posted by: FormerAptBroker at October 28, 2009 5:55 PM
The listing agent has a fiduciary obligation to the seller, but doesn't the buyer's agent have a fiduciary obligation to the buyer? (leaving aside the ethical morass of dual agency)
Doesn't the buyer's agent obligation extend to informing the buyer if they are aware of any price reductions or relistings of a particular property, and if so, why not automate that information? (FWIW, last time I used a buyer's agent the agent did proactively inform me of relistings on properties I was interested in, though I cannot know if that information was complete)
Posted by: Delancey at October 28, 2009 6:04 PM
"Placed on market : October 8, 2008 @ $1.4M
reduced : Jan 8, 2009 to $1.3M
reduced : Mar 8, 2009 to $1.2M
reduced : May 8, 2009 to $1.1M"
Isnt this sort of data available on redfin? Eg take this one:
Posted by: mac at October 28, 2009 7:38 PM
If MLS listings aren't ads then how can someone be sued over incorrect information in the listing (sqft)? It seems like they are viewed as ads in the law.
If this study becomes public knowledge and buyers realize that they could have saved a bunch of money if the correct DOM was on the listing instead of an incorrect DOM wouldn't that cause the affected buyers to feel defrauded? I wonder how long before we see lawsuits over this data point too?
Also while I agree that an agent has to act as a fiduciary to their client it interests me that they think that faking the DOM is OK, but faking other things like sqft is not.
Also who gets sued over sqft, the realtor, or the seller? If it were the sellers liability I bet we would see plenty more properties with sqft measurements.
Redfin certainly seems to be much more open with information, and if they can do it then so can the local MLS.
Posted by: HappyRenter at October 29, 2009 7:46 AM
The misrepresentations that are permitted, and tacitly encouraged, on the MLS are bad in their own right. But the most significant legal issue imho arises from the fact that the MLS is a joint venture among competitors, and thus implicates both federal and state antitrust laws. Business practices that are sleazy and unethical, but not necessarily illegal if done by a single actor, can become per se antitrust violations if the result of concerted activity among competitors. A § 1 Sherman Act or Cartwright Act action would be a no-brainer, with the only tough issue being the determination of damages (and perhaps antitrust standing under the federal statute). This study would go a long way toward a viable damages calculation.
Posted by: Trip at October 29, 2009 8:25 AM
Delancey is right. Buyer's agent is supposed to represent the buyer. One of the first things I do when representing a buyer is check out the history of the property, when it was last sold, how long it's been on the market, if it was withdrawn etc. It's not that hard to do, and the responsibility of the buyer's agent. If you've been doing business in the neighborhood for a little while, you probably already know.
Posted by: Paul Hwang at October 29, 2009 8:33 AM
I propose we indeed seek for approval to create yet another street parade in San Francisco. We'll call it "Hatefest" and give out free but honest information about SF real estate. The public will be so happy that there is a place to obtain honest information that soon the realtors will want to join (seeking clients of course). This is when we we'll catch them, cage them, and force them to gain an education. Those that resist or fail to show intelligence, well, we'll send them Las Vegas where the real estate has been so depressed that they could indeed use some artificial price inflation.
"oh man, cue the haters...here they come!"
Do you REALLY think we deserve the title "haters" if all we seek it accurate data? You know you can still inject deception using this new truthful data, if that's what gives you an 'edge'.
Posted by: Tall Guy at October 29, 2009 8:38 AM
"Buyer's agent is supposed to represent the buyer."
Exactly. It's not hard. Get yourself a reputable and knowledgeable agent and none of this matters.
Could MLS be better? Sure. But if you are buying a place using only the data in MLS, then you deserve to get screwed.
Posted by: R at October 29, 2009 9:07 AM
"Exactly. It's not hard. Get yourself a reputable and knowledgeable agent and none of this matters."
Why does an agent need to be in the loop for acquiring what is simply a report from a database? We're talking about something like two clicks on a website, right?
If I were an agent I'd rather be spending my time applying my talent towards matching my client to the right property than being essentially an 1800s era data clerk.
Posted by: The Milkshake of Despair at October 29, 2009 9:19 AM
resetting the DOM is nothting short of fraud, pure and simple. It's a bald-faced lie. It should be illegal everywhere. Anyone who thinks that a realtor's supposed "fiduciary responsibility" to their selling client is more important than honesty and fair disclosure has serious ethical problems, and underscores the rot at the heart of the realty racket.
Posted by: disgusted at October 29, 2009 10:00 AM
R's comment illustrates my point about collusion and the antitrust implications. He validly notes that, essentially, everyone knows or should know that listing agents commit fraud on the MLS, so you need your own buyer's agent to sift through that fraud. But the MLS is a joint venture among those same listing and buyers' agents. And they've set up the system so that the seller (in reality, the buyer) pays both agents out of the purchase price so the impact of the collusion is masked. Nice little system, but quite clearly unlawful unless it is policed to eliminate the fraudulent aspects.
Posted by: Trip at October 29, 2009 10:06 AM
What about resetting the DOM with a price reduction of a certain amount? Is that then not a "new" market for the property? What about time? Is not, say, three months, a "new" market? In business terms it certainly is viewed that way. Look at this quarter versus the last one for example.
Posted by: anonn at October 29, 2009 10:10 AM
anonn -- I don't think either time or price say very much. If it's the same seller, it's the same seller. And it's certainly still the same market.
Re: the business analogy, if I know Company X is not doing well and is looking for someone to buy them out, it's not like it matters whether that happens in Q3 or Q4 -- I know who the seller is and how long they've been shopping themselves and what valuations they're looking for. MLS specifically tries to hide this information and make it non-public.
Posted by: corntrollio at October 29, 2009 10:18 AM
And it's certainly still the same market
Hardly. Not for either. Take the Golden Gate property. A 2M+ SFR in that area versus a 1.8M SFR? Different markets.
And time? Are you joking? Sure, no offense, but it's all the same to people who pass comment on real estate on websites. Fall 2009 versus March 2009. Same same is it? No, it's not.
Posted by: anonn at October 29, 2009 10:24 AM
Your points are orthogonal to the issue and not even necessarily valid. Knowing DOM means that people have more transparency, and that's a good thing, regardless of whether you personally happen to think those changes mean that the house is in different markets.
It's certainly important info to know that someone tried market their house as a 2M+ property and failed miserably. Similarly, it's important to know that someone has had their house on the market for 6 months between March 2009 and Fall 2009. Your "all markets are local"-type platitudes are a little tired.
Posted by: corntrollio at October 29, 2009 10:41 AM
I think people are thinking the MLS is more powerful than it is.. It's essentially Craigslist for Realtors. It's just advertising, take it as such.
And I don't think it really matters how long a place is on the market, you should pay what it's worth. And in 99% of the cases where something is sitting on MLS forever, it's because it's overpriced. It doesn't matter if it's been there for 1 day or 1 year, if it's overpriced, it ain't gonna sell.
Posted by: R at October 29, 2009 10:42 AM
Your internet-speaky persona is grating. Your opinions are opinions, merely. The information you ask for is available to paying MLS subscribers.
Posted by: anonn at October 29, 2009 10:56 AM
"It's [MLS] essentially Craigslist for Realtors. It's just advertising, take it as such."
Craigslist doesn't provide an extended transactional database that is useful for assessing the state of the market and the value of individual properties. Cragislist does not make any attempt to track the real or fake DOM stat. MLS does, but the complete dataset is only available to its members. That's fair : the members pay for MLS and they should be granted more functionality.
I've got no issue with paying members having better access than the non-paying public. But the issue here is that a piece of info being presented to the public - DOM - is being manipulated to deceive the public.
This can be easily fixed by giving the public a little more access (i.e. to the property's relisting log). SFAR members will still have access to a superior data-set in other aspects.
Posted by: The Milkshake of Despair at October 29, 2009 11:02 AM
Does it really matter if the market has changed? It's still the same house. The information should be out there and simple to go through. Seems like a reasonable request.
Posted by: bornnraised at October 29, 2009 11:04 AM
1. to dislike intensely or passionately; feel extreme aversion for or extreme hostility toward; detest:
Yep...haters. Except for maybe the editor who makes a lot of his money from realtors...I'd say most people on this site fall under that category. Don't worry, its a free country, you're allowed.
Posted by: anon$random at October 29, 2009 11:29 AM
Sounds like the fix is just to take DOM off of the public MLS. You want that info., then ask your realtor who is paying for it.
Posted by: sparky-b at October 29, 2009 12:07 PM
Sounds like the fix is for buyers to ignore sfarmls altogether and put their support behind neutral aggregators like redfin, zillow, and trulia.
... and to keep reading socketsite.com
Posted by: The Milkshake of Despair at October 29, 2009 12:59 PM
You can look up all property histories in the MLS, so this sort of tactic is pretty transparent.
Posted by: insidesfre at October 29, 2009 5:53 PM
Maybe you can look up property histories in the MLS, but I cannot. Next time I'm buying property I'd gladly pay well (I'd say $500 per month while looking for a million dollar property is not outrageous) for the same unfettered read access to the MLS, but that direct-pay option is not available unless I go through the rigamarole of becoming a real estate professional. Perhaps that is the reason during the mid-2000s a ridiculous percentage of the california population had a real estate license.
Instead, I have to use a buyer's agent as a waldo to fetch me data, with every opportunity for errors of transcription or omission.
Posted by: Delancey at October 29, 2009 6:27 PM
Why haven't discount real estate brokerages caught on here the way they have in Europe? In the U.K., many reduced fee real estate companies make you go to the property yourself with the lock box code, but only after you are "checked out". I would rather save 40K and open the blinds and turn on the lights myself.
Posted by: missingUK at October 29, 2009 8:33 PM
The estate agency model in the UK is completely different. With low commissions (1.5% for the whole deal), no licensing, no MLS, and no buyer representation in the UK, the US and UK systems can't even really be compared.
That being said, I'm recently back from many years in the UK and never encountered the model mentioned, though the "full service" agencies don't actually provide much more than unlocking lockboxes. The entire purchasing process there is so unethical and unprofessional that it would seriously make your collective heads explode.
Posted by: Scooter at October 29, 2009 10:05 PM
"Get yourself a reputable and knowledgeable agent…"
Why should it be a requirement to engage an estate agent in order to ferret out the misrepresentations made in the MLS?
Precisely. Realtors engage in systematic misrepresentations of the stuff they sell so that they can make money from buyers by debunking… themselves.
What kind of "profession" is this? Obviously, it's a racket, not a profession.
Posted by: Embarcadero at October 29, 2009 10:46 PM
The chief aim of the DOM manipulation is to "deceive" other realtors. The point is to get the property back onto the front of the toursheet and the front page of the MLS. In order for realtors to see the actual DOM, realtors need to drill down one click, and to do some simple arithmetic. Compare that with what buyers (who get the actual information from their realtor anyway) and internet hobbyists must do. In order for them to see the actual DOM, they need to do a Google search, pull up the various net brokerage pages, and do some simple arithmetic. Not much difference. The MLS is a proprietary database, it's not yours, it's ours, and its new entries dictate how the tour sheet is ordered. Know that. .
Posted by: anonn at October 30, 2009 9:26 AM
The other thing that people forget is the aggregate effect of all of this as it shows up in statistics. DOM and listing price changes don't just make things show up on the front of a tour sheet. All of these DOM and listing price manipulations show up in aggregate statistics too. These aggregate statistics are quoted by all kinds of people, including journalists.
So while the suggestions might be that these sorts of dishonest behavior only affect tour sheets, and if people only had agents, they could get around this problem because a good agent would inform his/her client, the reality is that the aggregate statistics are juked and can't be relied upon. When realtors say that the average or median property in SF County sold at a certain percentage of listing price or sold within a certain number of days, the average buyer can't possibly know if that's true.
Posted by: corntrollio at October 30, 2009 10:31 AM
Is it just a coincidence that the only times I hear the expression "hater", it's from a teenage girl or anonn?
Posted by: nnona at October 30, 2009 10:43 AM
Is it a coincidence that your pseudonym is mine spelled backwards? Or that whenever you appear it is to say something directly to me?
Did I even say hater in this thread? (Maybe like, fourth in line.) FYI, "hater" is a pretty common, and apt, term.
Posted by: anonn at October 30, 2009 10:49 AM
Corntrollio hit this one dead on. Sure, you can use a realtor to dig through their secret cache of data regarding a specific property - but then how do you compare it to anything? The aggregate data is totally jacked - comps, neighborhood, all of it.
[Editor’s Note: Or as we wrote above (and originally in 2006): "At the risk of pointing out the obvious, consider any marketing materials, websites, or press releases that reference an MLS derived statistic such as average days on the market (DOM), or selling price to list price ratio (SP/LP). If any of the underlying data has been "refreshed," do these statistics really "present a true picture" and representation of the market?"]
Posted by: OneEyedMan at October 30, 2009 10:52 AM
What specificaly aggregates the data to publish statistics? What aggregate statistics, specifically? Also, why can't that tool accumulate the previous listing periods? They were published online previously.
Posted by: anonn at October 30, 2009 11:02 AM