12/19/2014 06:04 EST | Updated 02/18/2015 05:59 EST

Days on Market: A Misleading Real Estate Statistic

Sold Home For Sale Sign in Front of Beautiful New Home
Sold Home For Sale Sign in Front of Beautiful New Home

In real estate, the Days on Market statistic is meant to measure how many days a property takes to sell. This is a very useful piece of information, and if used properly can say a lot about an individual property, a neighbourhood, or even the entire real estate market.

The problem is that this statistic is skewed by a practice that some agents employ where if a listing doesn't sell quickly, they deactivate the listing and then reactivate the listing the next day. This resets the Days on Market count back to zero, making it seem like a new listing when in reality it has been listed for much longer.

A good example of this occurred earlier this year when I received a letter in the mail from a local agent giving a market update for my condo building. This letter said that in the previous month, one property in the building had sold, and it had been listed for seven days before selling. This seemed strange to me as I knew the property that sold had been listed for several months. I checked the listing and it turned out that it had been listed for a total of 232 days.

During this time, they had reduced the price by over 15 per cent, and also used three different real estate agents. It was only after this latest listing reactivation and accompanying price drop that the property sold. It is very obvious that this property did not sell in 7 days, however this is how it is advertised and how it appears when data is collected to measure market trends. So when we read news articles about how the average Days on Market in Toronto is under 2 weeks, the data used counts this property as taking 7 days to sell and not 232 days.

I am seeing more and more agents employ this strategy, but I don't see how it helps to sell a property. In the situation above, it was the price drop that sold the listing, not the fact the property was re-listed. All buyers in today's world are online, and they will already know about all the properties available that meet their criteria. If the same listing keeps popping up at the same price, buyers will keep ignoring it regardless of how many times it shows up on their screen. If anything, this could create a negative experience for them. In the modern world where the internet does most of the work when selling a house, many agents are struggling with finding ways to add value for their clients and this is something they try.

The long term effects of this strategy could be disastrous. Many people make their real estate decisions based on what industry experts say about the real estate market. When the data these experts use is flawed, they could be giving bad advice without realizing it. This also increases the risk of a market correction happening with little warning.

The good news is there are solutions to the problem. Industry regulators can help to make sure that this strategy is not used in a way that can skew the data, and the Days on Market statistic can be changed to measure how many days a property actually takes to sell instead of just measuring the most recent listing. Until then, as always buyers and sellers should be very thorough and ask for a complete history of every property they see.