What can Time on Market Tell me About a Property?

29/11/2014   by The Hopkins Group

Time on market is often cited as a factor property buyers should pay close attention to as conventional wisdom says it can give you a strong indication of the property’s real value. But is there any real substance to that assumption? What exactly can time on market tell you about a property?

Maybe Everything

In general, properties with a long time on market (TOM) command lower sale prices compared with properties with a shorter TOM. That’s because there’s a perception that there is something wrong with the property causing people to believe it’s overvalued – or that puts them off even making a bid.

And it makes sense when you think about it logically – have other prospective purchasers spotted something you haven’t?

Time on market therefore often factors into the pricing strategy buyers create when bidding on a property.

Maybe Nothing

Time on market statistics are often cited on a local and national level as a metric for gauging the temperature of a housing market. So it may be that a property’s time on market has more to do with the market than the property.

Have you looked at time on market for other properties? How do they compare to each other? Bear in mind that the property market is always moving and shifting – looking at time on market for one property in isolation won’t tell you if they’re high in general due to market factors.

There are also seasonality factors to take into consideration; in Australia, more properties are sold during spring – due in part to better weather driving strong auction attendance. That doesn’t mean, however, that the market stops altogether for the remainder of the year. For those brave enough to list their property for sale during the colder months, the reward may be a longer time on market than if they’d listed it during in the traditionally busy period when there are more people bidding at auction.

There are also additional factors that can artificially inflate or deflate the number of days a property spends on the market. For example, some sellers will remove sale listings that still have months to run if they think the time on market is putting prospective buyers off – only to re-list it shortly afterwards. This effectively “resets” the number of days the property has been on the market, making the figure look much lower than it should.

However, buyers and real estate agents are able to conduct their own research into the property’s listing history, allowing them to obtain a more accurate picture of how long the property has been up for sale.

So while time on market can be a useful guide in determining a property’s value, when viewed in isolation, it may tell you very little.

For expert advice on how to find the perfect investment property, call The Hopkins Group on 1300 726 082 or contact us here.

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