Reduce your property’s days on the market

Days-on-the-market (DOM) is an important measurement in property, showing how long a home is listed for sale before someone buys it. According to SRX Property data, the average DOM for a Housing and Development Board resale flat is 82 days, meaning it takes almost three months on average to sell an HDB home. It is much worse for condominiums, with the average DOM for private housing at 137 days, or over four months.

Typically, the average DOM is inversely correlated to market conditions, meaning it is long (or high) when demand is low and the market is slow.

In contrast, the average DOM is short (or low) when the market is hot and homes are selling like hot cakes. As such, it is easy to blame today’s unusually long DOMs of 82 and 137 days on the imposition of the property market cooling measures.

In my view, this is too easy of an answer. Yes, the cooling measures have reduced demand, but a DOM of three to four months is an awfully long time for a home to sit unsold. Furthermore, how do the cooling measures explain those homes that sell in fewer than 14 days? I would submit that today’s long DOM is partially a reflection of the cooling measures but mostly the result of market mispricing.

Over the last year, the average purchase price is within 3.6 per cent of the SRX’s computer generated X-Value for all home types, including landed homes. This means that most sellers cannot beat the X-Value by that much.

Yet they try. If you look at listing prices for most units, they can deviate significantly from the corresponding X-Value.

Recently, I reviewed one condominium that was priced at more than S$100,000 above its X-Value.

The owner felt that the view warranted that premium. The home sat on the market for 45 days, when it received 20 visits and no offers. Finally, the home was priced by a valuer at S$10,000 above X-Value to account for some qualitative factors, and it was sold within two weeks.

The point is that you can try to sell a home above market value but in order to be successful, you must be able to find a buyer who does not understand current market pricing. These uninformed buyers are becoming rarer and rarer, so you might as well avoid a long DOM by pricing the property at the right price at the start.

Pricing a home that deviates significantly from its X-Value creates significant risk for the seller. The longer a home sits on the market, the more “stale” it becomes.

Buyers are smart. They see a long DOM and a large mismatch between the asking price and X-Value and their antennas for danger go up. Many will not bother viewing it, while others will view it but not make an offer. Some will try to negotiate the price down. No informed buyer will purchase it at an inflated price.

What does the seller get out of this scenario? A reputation for asking too much, and the agony and inconvenience of people traipsing through his home with no offer to show for it.

My advice to sellers is: Set the right price. Ask your agent to hire a valuer. If the valuation meets your expectations, then list it at the valuation plus goodwill. If you think the value of your home is too low, sit it out until the market catches up to your expectations.

ABOUT THE AUTHOR: Sam Baker is co-founder and CEO of SRX Property. For more strategies for transacting the right home at the right price, visit SRX.com.sg.