More Time Means Less Money in Home Sales

By Dave Fratello | August 31st, 2020

The first two weeks of a real estate listing are critical.

Drawing offers within two weeks gives you your best chance to get asking price, or above asking price.

After that... it's going to get tougher.

Maybe these observations seem obvious to you, a real-estate-savvy reader of MB Confidential.

Still, when you see the data, it's going to make an impression.

We did a custom run of about 18 months of data on sold properties (closed sales). We figured that using only one year would mean data clouded too much by COVID-19 impacts.

We found that more than half of the homes that sold (53%) in all of Manhattan Beach had accepted an offer in 30 days or less.

In fact, most of those (40% of all sales) accepted an offer by Day 14 on the market. As we'll see, homes selling that quickly had the highest chance for selling over asking price.

And while about half the sales took longer than 30 days to accept an offer, the outcomes were very starkly different.

Virtually no home that sat more than 30 days got asking price, and none sold over asking. 

30 days appears to be a clear cutoff date: After that, a seller can almost forget about getting list price.

Let's look closer at the data.

First, the best outcomes.

We looked at homes that sold after drawing an offer between Day 0 and Day 14 on the MLS.

These 0-14 day sales made up 228 out of the 569 homes sold in the period we studied.

40 of these sales showed 0 days on market, often a reflection of a deal worked out pre-market. There were 5 more with 0 DOM but which had been listed before, so the 0 days was not really showing the home purely new to market.

You can see that 38% of these quick sales went over asking, and another 25% got the asking price.

This is to say that with a well-priced, attractive listing, you have nearly a 2 out of 3 chance to sell at or over asking within 2 weeks.

The breakdown is similar for listings that posted 0-29 days on market.

Obviously the proportion of homes selling under asking has increased here - they're almost half the mix, instead of being closer to one-third. Still, a majority (52%) got asking price or more.

Looking closer, in days 15-29, only 12 more homes sold for asking or above, while 63 more went under.

Another way to look at that is to say that 84% of the new deals made from day 15-29 went under asking. This again underscores the importance of those first two weeks.

If that 84% selling under asking seems like a trend taking hold, yes, it is.

Our next chart shows what happened to listings from day 30 onward.

Instead of 84% selling under asking, it's 97%.

If you get past Day 30, your chance of getting the original list price has almost vanished.

Now, there were 7 outliers here that did get their asking prices. (None sold over asking.)

But.

Two of those 7 had recently tried to sell twice each, but failed. They had already done some price discovery, in other words. They sat on a new, reduced listing price past 30 days, but got it this time.

One more was a probate listing that appears to have had a required period of time to be on the MLS before offers were processed and a successful bidder chosen.

And one was sold tenant-occupied and subject to a lease, closing soon after the lease expired. We suspect, but don't know for sure, that the property was pending while the lease timed out, then the sale was allowed to close for the new buyer.

Those mitigating circumstances account for 4 listings that appeared to sell at asking price after 30 days.

That means out of the 7 listings that hit asking after 30+ DOM, just 3 "regular" sales seemed to avoid a price dropoff after 30 days:

508 Rosecrans ($1.949M, April '19) (pictured)

1800 11th ($1.799M, Feb. '20)

1631 19th ($2.999M, Aug. '20)

And their days on market ranged from only 31-36 DOM, so it is not as if they parked it for 3-6 months and simply waited for the "right buyer" to step up and pay full price. We're talking about less than a week more than the 30-day cutoff.

Based on these data, it appears that buyers almost always recognize the opportunity to get a home for less if it's been on the market a while.

Most striking is how strongly tied a good outcome is to those first 14 days.

A couple of fairly simple conclusions:

1) How you price a home upon launch on the public market is critical.

2) Waiting doesn't help.

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Nerdy notes: These data come direct from the MLS database, a custom run of numbers by Dave and MBC covering all Manhattan Beach areas and home types for the time period specified. Some quick points:

> As noted in the post, some sales appearing with 0 DOM were sales arranged pre-market or off-market, and simply posted to the database later.

> We based the DOM analysis purely on the DOM count for the listing that sold. The same home can have multiple, consecutive (or nearly consecutive) listings, and the DOM "clock" can be reset by a re-list. Sometimes, we will count by CDOM (combined days on market) in an analysis like this, but we kept this simple and use the regular DOM only. That is to say, a few listings in the "less than 30 days" category may have had more days on market in a prior listing.

> Sometimes, there can be a difference between the beginning/start price on the MLS and the last listing price (i.e., after a cut), meaning the last asking price before an offer was accepted. In this analysis we found both that the homes sold after 30 days took less than *start* price and less than the *last asking* price, so the distinction did not matter in this case.

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