In Which I Solve the Days On Market “Mess”

Over at Inman, there’s a great writeup of a truly inside baseball topic: the confusion and controversy around Days On Market. Andrea Brambila wrote the report on a panel discussion between Sam Debord of RESO, Rene Galicia of NAR, and Katie Smithson of W+R Studios. All three are people I count as friends, and they have likely forgotten more about the complications of Days on Market (or “DOM” as we all call it in the industry) than I ever knew.

However, because I am not quite as invested in the DOM issue as the three of them, I believe I can help solve the problem for them and for all MLSs that remain interested in staying an MLS.

More importantly, perhaps, is the general principle I will apply in solving the DOM problem and how an MLS can apply the principle to arrive at an actual solution.

Ready? Here is the solution: Define DOM how a consumer would define DOM.

Simple. Not easy, but simple.

Let’s talk about it. Because this isn’t just about DOM, but about the special role of the MLS itself.

On the Issue of Days on Market

As Sam Debord is quoted in the Inman article as saying, on its face, DOM seems like the most obvious and simple thing in the world:

“Days on market sounds like a boring topic to start, but it really affects what we present to consumers,” DeBord told attendees of the all-digital conference. “It actually affects what we represent is the truth to the people we work with and it affects our history of our sales transactions, etc.”

“So, while you think this would be consistent and simple and straightforward — something as simple as counting the days that a property’s been on the market — it’s actually sort of a mess. It’s really all over the board.”

On its face, DOM is simply how many days a property has been on the market. That’s it. A home is listed for Sale on 10/1/2020 and is sold on 10/15/2020: 14 days on market. Simple arithmetic, right?

So why is this so complicated? Why is there a controversy around DOM at all?

There are, roughly speaking, three main reasons.

First, the seller doesn’t want a long DOM stat because that tells the buyer that there’s something wrong with the home or that it’s overpriced. We all have at least seen Ebay or Facebook Marketplace or Offerup. We all know that if something unique is just sitting there still available for purchase, it means other people didn’t want it for whatever reason. It’s a strong market signal as to either the quality of the product, or its price.

Second, the listing agent doesn’t want a long DOM stat because that implies something about her ability to market and sell a home. Almost all agents know that what sellers want is the most money in the shortest possible amount of time with the least amount of hassle. So being able to tell potential sellers, “I sell a house in 5 days on average” could be important to land the listing in the first place.

Third, various people and entities often could want the DOM to be short so as to give the impression that the market is hot, hot, hot. A long DOM after all implies that inventory just isn’t moving, so buyers can be more picky, and sellers might not want to list their homes for sale.

As a result, there are reasons to play around with the definition of DOM, and with how it is measured.

A classic example is the difference between “total” DOM vs. “current” DOM. A house is listed in Jan 1, 2020. It is overpriced and a dump. It does not sell for 90 days and the listing expires. A second agent comes in, takes the listing, convinces the seller to do some minor renovations, takes some new photos, puts a new listing price on, and puts it “back on the market.” On April 15, when that house is listed, what is the DOM? What should it be?

Some would argue for the “total” DOM: 105 days. Others, however, particularly the second listing agent would argue for a “current” DOM: 0 days.

Suddenly, we start going down a rabbit hole of complexity. Should the “current” DOM be 0 days or 15 days, when the listing agreement was signed? What if the listing agreement was signed on April 1, but with a 14 day “Coming Soon” provision? Is a house really for sale and therefore “on the market” if it’s in a Coming Soon/Preview status? Well, it is and it isn’t… right?

Does the act of renovation and the new list price mean that the house is different enough to be a “new listing” on the market, even though the seller has been trying to sell the house for 90 days? How much renovation is enough to qualify?

Does it make a difference if the first listing agent, who failed, and the second listing agent hang their licenses with the same brokerage? What if the first agent is actually a team member of the second agent? Does that make a difference? Should it?

And so on, and so forth, and welcome to many a MLS Board of Directors meeting where these arcane minutiae are debated fervently.

No wonder there is no national standard for what DOM is. No wonder that our three experts from the Inman panel all pointed out the difficulties of having a single standard.

And then we get this from Galicia, of NAR:

“Policy is truly by members for members. Policy comes about by members getting involved, coming from that perspective of being a broker cooperative, thinking of those policies that make life easier sometimes. But policy has to be determined by members, and it’s determined by members with diverse business models, sizes, areas of expertise, technology partners and it’s informed by that experience in the marketplace.”

He is, of course, correct. MLS policy is determined by the members, or their representatives. And on that approach, we cannot help but have a thousand flowers bloom.

The Policy of Truth

But there is a different approach, as pointed out by Galicia himself:

Galicia said it was important to keep in mind that the MLS is not a marketing platform, but rather a broker cooperative whose purpose is to be a source of truth and share accurate, complete, consistent listing information.

“We need that one true north,” he said. While the MLS is a marketing gateway in the sense that it distributes listings to other platforms for the promotion of listings, that’s a “second tier” purpose, according to Galicia.

He is absolutely, 110% correct. The MLS is not a marketing platform, at least to the public. Its value is inherently in being trustworthy. That a listing agent might want his own personal DOM stats to be as low as possible is interesting, but it cannot be basis for a policy of truth. Galicia is right that we need the “one true north” and that the MLS exists to be that source of truth.

But I’d like to go deeper and be more explicit.

The MLS does not exist to be that source of truth to make life easier for brokers and agents, but to inform the buyer and the seller as to what is happening in the housing market and with a particular property. We know that various people want to play games with DOM because it helps them get more money for their homes, or get more business, or get people more eager to be buying and selling houses in the first place. But that cannot be the basis for a policy of truth.

The best analogy I could come up with is odometer readings on used cars. Yes, sellers have a vested interest in playing games with how many miles are on their car. Used car dealers have a strongly vested interest in the same. That doesn’t mean that we allow sellers to represent mileage in a different, unique, local fashion for whatever reason. There is no difference in how miles driven is measured whether one lives in Colorado and only drives narrow winding mountain roads or lives in California and only drives paved broad freeways. You don’t get to drive the car in reverse, Ferris Bueller style, and “take off the miles.”

As a society, we don’t allow playing games with the odometer (it’s against the law) because fundamentally, buyers and sellers need to agree on what the car’s mileage is in order to have trust in their negotiation.

If the MLS does not wish to stop being the one true north, perhaps it could change the way it thinks about policymaking. The MLS does not make policy for its members, but for the public, for the consumer. Because it is the source of truth that professionals can rely on in order to convey accurate information to their clients and to the public.

Accordingly, I would argue that policy should not be made by the members for the members. It should be by the members for the public, for their clients. Because if being a REALTOR means anything at all even in these less noble times, it has to mean owing duties to the client and to the public. And fundamental to that duty is the duty to be honest as one can possibly be.

Now, different REALTORS can have an honest and genuine difference of opinion on whether Coming Soon should or should not count in DOM. They could have an honest disagreement, without playing any games, on whether COVID restrictions should or should not pause DOM.

There is a way out.

The Solution: Ask the Consumer

Seems to me that the simple way out of the conundrum is to ask the consumer what they think. After all, DOM exists to serve them, not their REALTORS. It exists to give the buyer and the seller an idea as to the state of the market, and signals about a particular property. So ask them what they think and base your policy on that.

Surveys are not difficult to do. They cost some money, yes, but if an MLS cannot afford to conduct a simple consumer survey, perhaps it ought to question why it exists at all. Or if NAR wants to step in, perhaps this would be an area in which they can be helpful. Don’t just say that policy is made by members, for members. Go out to the public, to buyers and sellers, with policy questions and ask them. Because MLS policy exists, fundamentally, to serve the consumer. (At least, it should.)

If 80% of consumers surveyed say they think “total” DOM is the way to go, well, there you have it. If they think “current” DOM is better, implement that.

The details get too complicated? Too intricate and arcane? Then rethink why that detail is necessary in the first place. Because if a consumer can’t understand the detail, they can’t trust the big picture, can they? Keep it simple, because all policies exist to serve them in the end.

We might never get to a single national policy on DOM, because each market might be different. But then let the market speak, not just the REALTORS who work that market.

Expanding the Principle

DOM is a useful jumping off point to think about this idea, this principle that the MLS serves a very particular role in the industry.

For far too long, we all have been entirely too inwardly focused when it comes to the MLS. Far too many MLSs today believe that their mission is to help their members be more successful. But frankly, other organizations exist whose mission is to help real estate agents be more successful: brokers, franchises, the REALTOR Associations, vendors, marketing consultancies, etc. etc.

Only the MLS exists to be the source of truth. For whom? For what purpose?

It has to be to be the source of truth for consumers, so that professional can serve them and be trusted. No one else in the industry serves this role today. Frankly, no one else even wants to serve that role, because it is hard and thankless and there isn’t a whole lot of money in it.

And yet, that role is so important and must be done. We all need that one true north. And we need it whether members like it or not, because in the long run, the truth preserves the most important asset of real estate agents: trust.

Isn’t that, to quote CMLS, making the market work?

We all know just how difficult it is for brokers and franchises and REALTOR Associations to tell their agents what they don’t want to hear. There has to be someone who can do just that. If that someone is not the MLS, it will have to be someone from outside the industry — see, e.g., odometer readings.

Implementation of the Principle: A Few Ideas

Articulating the principle is one thing. Executing on it is a whole different ball of wax. I am entirely sympathetic, so let me leave with some actionable suggestions.

Consumer Surveys

First, as noted above, every MLS should be conducting consumer surveys for internal/member use only. The point is not to market the REALTOR, or glorify yourself, or issue press releases on how much buyers love their agents. The point is to understand the consumer’s point of view on important policy questions.

If there is genuine and honest disagreement between professionals, well, take the question to the public. Ask them how they see things, how they understand things.

Coming Soon controversial as hell? Go ask consumers. See what they think about that issue.

Procuring Cause hard to delineate? Go ask consumers. See what they think is fair.

Go direct to consumers; do not just survey your members to have them tell you secondhand what their clients do and do not want. Go direct to the clients.

If you can’t afford to do a few Surveymonkey surveys… seriously go find the nearest larger MLS and merge with them. Please. For your own good, and for the sake of your paying subscribers.

Outside Directors

Second, I have long advocated for having outside directors on MLS boards for a variety of reasons. But getting a consumer’s direct viewpoint might be the most important of them. Perhaps with 2-3 non-REALTORS on the MLS board, the MLS need not take every single question to a consumer survey. You can hear directly from your own board members on how they see things from a consumer perspective.

Take a Look at Current Policies

Third, I believe that the MLS should put together a workgroup to comb through all of its current rules and policies and ask of each one, “How does this policy serve the public, the consumer?” To ensure that question is taken seriously, I would advise making sure that the consumer is well-represented in that workgroup. I think a 50/50 split between consumers and professionals is the bare minimum; 80/20 would be better.

The goal, after all, isn’t to “win the argument” against a consumer who doesn’t know all of the details. The goal is to understand how they see things, to make sure that a particular policy is serving their interests, and that they can tell.

If you have spent any amount of time reading MLS rules and policies, I think you can agree that maybe it’s time for a look to see if maybe the rules have gotten a wee bit bloated over the years, a bit too tangled in all of the industry’s inside-baseball stuff. These are, after all, our own rules for our own organizations. It isn’t the Bible or the Constitution. We can overhaul MLS policies anytime we want, as much as we want.

Open Up the Policymaking Process

Fourth, I can’t think of a reason to keep policymaking secret. I’ve been in a lot of MLS board meetings. There are times when confidentiality is important, like when you’re discussing a pending contract, or talking about corporate strategy, or discussing personnel issues.

I have never been to a board meeting when they were discussing a MLS rule or a policy and thought that needed to be secret. “How should new construction be handled in the MLS?” is not something that needs to be kept behind closed doors.

Now, do I think consumers or even most of your members will come hear policy debates and participate? Not at all. Maybe a few real estate nerds might show up, but really, I can guarantee that your local schoolteacher and her cop husband have never once discussed how DOM should be counted, or how close a house must be to the ocean to be called “beachfront.”

But opening up the process (a) lets everybody know that they could participate if they wanted to, and (b) provides a way for interested brokers and agents to invite their clients to attend in order to inform the board on a particular issue.

If nothing else, the light of transparency will shine all around the MLS, which can only make your members happier.

Wrapping Up

This got long. I’m sure you’re shocked, shocked.

The DOM confusion is a great illustration of one of the flaws that have crept into our foundational system. It didn’t happen through malice, or through bad intentions. It’s just the passage of time, people naturally acting in their self-interests, and entropy: the simple getting complicated, because life is complicated.

But somewhere along the way, it does appear that we have lost sight of what makes the MLS special, and so valuable. Yes, it is the one true north, the source of truth… but to what purpose? It’s as if we forgot that the source of truth exists for the public, for the buyers and sellers who rely on that truth to make life-altering decisions, rather than for the real estate agents who serve them.

Let every other institution in real estate serve the real estate agent, because they were created to serve them. But there has to be somebody whose job is to tell the agent what he or she doesn’t really want to hear, because it is the truth, and truth leads to trust, which is essential for the agent to do his or her job and make a living.

I agree with Rene Galicia. The MLS is the one true north. We must have it be the one true north. Even if everybody else in the industry is busy marketing and spinning and putting on Instagram filters, the MLS needs to adopt the policy of truth for the sake of consumer confidence in all of it dealings… whether members like it or not. Yes, you might see your problems multiplied if you continually decide to faithfully pursue the policy of truth. But that’s what we all need from you.

-rsh

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Rob Hahn

Rob Hahn

Managing Partner of 7DS Associates, and the grand poobah of this here blog. Once called "a revolutionary in a really nice suit", people often wonder what I do for a living because I have the temerity to not talk about my clients and my work for clients. Suffice to say that I do strategy work for some of the largest organizations and companies in real estate, as well as some of the smallest startups and agent teams, but usually only on projects that interest me with big implications for reforming this wonderful, crazy, lovable yet frustrating real estate industry of ours.

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