Peer-reviewed research provides data to back up what experienced Realtors already know – the longer a house spends on the market, the less sellers earn in proceeds.
In a peer-reviewed research study titled “Days on Market and Home Sales,” published in the Journal of Economics, researchers Catherine Tucker, Juanjuan Zhang, and Ting Zhu explore how time on the market impacts a home’s sales price. They used a natural experiment when Massachusetts changed its real estate listing policy. They found that a buyer’s knowledge of how much time a home has spent on the market significantly affects home sale prices.
A Policy Change to Listing’s Days on Market.
In April 2006, Massachusetts introduced a new policy to curb the manipulation of the “days on market” statistic in property listings. Before this policy, sellers could reset this count by relisting a property, masking the true duration a home had been on the market. The new regulation mandated that the cumulative days on the market be displayed even if a property was relisted. The policy allowed exceptions under some specific conditions, such as if a property was off the market for over 90 days or a transaction fell through.
The study used this policy change as a natural experiment to compare its effects with the neighboring state of Rhode Island, where the old relisting policy remained in place. The Rhode Island community was similar to the across-the-border in Massachusetts. This comparison allowed the researchers to isolate the impact of the new policy’s cumulative days on market indicators on home sale prices.
Financial Impact of Buyer’s Knowledge of Days on Market
The results were striking, statistically significant, and unsurprising. The policy change in Massachusetts led to an average reduction of $16,000 in home sale prices compared to Rhode Island. This effect was particularly pronounced for homes that had been on the market for longer, while newer listings experienced only a slight increase in sale price. The longer the house was on the market, the bigger the impact on the home sales price.
There are a couple of key possibilities for these outcomes:
- Buyer Awareness: Some buyers were previously unaware that sellers could manipulate the days on the market. Once the true numbers were revealed, these buyers perceived homes that had been listed for a long time more negatively. As Tallahassee Realtors, we often hear this question when a house sits on the market – “What’s wrong with it?”
- Seller Reactions: Sellers adjusted their strategies in response to the new transparency. Many lowered their listing prices to attract quicker sales. Some sellers increased prices in areas with more transparent listing histories to offset the stigma of a lengthy listing period. They assumed they would be offered much lower, so they raised their asking price to (hopefully) adjust the buyer’s offer closer to what they ultimately wanted to receive.
Implications for Tallahassee home sellers and buyers.
The days a property spends on the market can significantly influence buyer perceptions and, consequently, sale prices. Homes lingering on the market may signal underlying issues or unreasonable sellers. This prompts buyers to infer unknown characteristics of the house and the seller and, in turn, negotiate a lower price. Conversely, fresh listings may enjoy a modest premium due to perceived higher desirability. As a Tallahassee listing broker, my experience has been that a properly priced home will have an offer within two weeks on the market.
This study highlights the importance of strategic pricing and listing management for sellers. Savvy buyers know to ask about the listing history of homes when considering making an offer. This study also points out the need for sellers to be more mindful of initial pricing to avoid extended listing durations that could harm sale prices. This is also why I advise sellers to regroup with me if we have been two weekends on the market and have not received an offer. Experienced Tallahassee real estate brokers know then that the market has spoken, and it is time to change tactics.
Experience matters when choosing your Realtor and home sale representative. If you are considering listing or buying your Florida home, let’s chat. Contact us here.
