HOW DAYS ON THE MARKET CAN BE MISLEADING.

We often hear “how long does it take to sell a home?” This is a touchy subject. The short answer of course is that with appropriate liquidity in the market it is “a couple of weeks”, but there's more to that.

First of all, selling a home is not rocket science. All you really have to do is tell the people who are ready to buy a home that you have one that they will like. If it is better priced compared to the competition, buyers would want to see it. If it shows well, one or more buyers would most likely write an Offer. With the right agent a sale will ensue. So the key to selling a home is to know where the buyers are, price the home to be attractive, promote the home to those ready buyers and have an expert agent on your side to negotiate and iron out issues so that the sale happens.

We know that 94% of homebuyers are using the internet to identify a home, and we know the processes that they are undergoing in their efforts to buy a home. So the market time (which is the answer to how long does it take to sell a home) is the time that it takes to fully expose a home to this buying audience (not shoppers or lookers but actual BUYERS). Thanks to the internet, this is usually 5-10 days.

Liquidity Matters When Selling A Home

There are times and price ranges where liquidity in the market might extend this market time, sometimes considerably. For example, if you have a $1.5M home to sell, and your market area only sees two sales in this price range every year, it might take a while for that buyer to come along. But when you see multiple buyers in a price range each month, enough liquidity exists for a quick sale.

You can determine liquidity by examining the active listings and the number of recent sales in your market area for your type of property. A good agent can provide that information and any of our agents excel at that. Supply and demand is a critical component of any market, and one should not try to sell a home without a solid understanding of where they fit into the market.

So to summarize, with proper liquidity and a targeted marketing plan, market time (or days on the market) for most homes is 2-3 weeks. For most properties, anything longer than that is due to a lack of information or lack of motivation on the part of the home seller (and anybody involved advising them on the sale of their home).

Measuring Days On Market (DOM)

It is misleading when a real estate agent reports “it takes 75 days for a home in this price range to sell.” Most agents look at “average market time” and think it is a valid measurement of how long does it take to sell a home. It is not.

When somebody gathers up a group of properties and determines an average of this, what they are really reporting is the average marketing time it took to sell a group of houses based upon the last time the property was listed in the MLS. Maybe an example would make this clear:

Mr and Mrs Miller listed their home “For Sale By Owner” for 30 days to try to sell it on their own. They had no luck (as one would know reading this blog) so they hired Broker A to sell their home. The home was listed for 6 months with Broker A and the property failed to sell. The Millers listed with Broker B and probably after some reduction in price, the property sold in 50 days. So, the MLS report would show a market time of 50 days!

Total time on the market for the Millers though was:

30 days “For Sale By Owner”
180 days with Broker A
50 days with Broker B
This is a total of 260 days, yet the MLS would report it as “50 days.” There is a way to find out the cumulative Days on the Market but an agent has to do a more comprehensive analysis of the MLS data (of course, our agents do this more intensive step).

Worst of all, what about the days on the market for all the homes that failed to sell. What if in our scenario the Miller’s home never sold? How would those days be factored into the mix? The facts on market timing are just a bunch of mis-measured time frames thrown into a pot and boiled. If liquidity is abundant, the home will sell when enough of the buying market sees it, and a well run marketing campaign will achieve that in a couple of weeks.

TAX BENEFITS OF OWNING VS RENTING.

When it comes to the tax benefits of renting vs buying, the benefits of buying far outweigh the benefits of renting.

Home mortgage interest deduction: The interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home is deductible as an itemized deduction. In the early years of a home loan most of the payments consist of interest, so this deduction is particularly substantial during the first years of homeownership.

In Wisconsin and depending on a buyer's bracket, this deduction can reduce the cost of borrowing by one-third or more.

Home equity loan deduction: Homeowners can borrow up to $100,000 against the equity in their home and deduct the interest as an itemized deduction. The money can be used for any purpose, such as paying off high-interest credit card debt. In contract, the interest on credit card debt is not deductible.

Property tax deduction: Homeowners also get to deduct from their federal income taxes the state and local property taxes they pay on their home. This is another itemized deduction that renters don't get.

Deductible homebuying expenses: Various closing costs ordinarily involved in a home purchase are also deductible as itemized deductions, including loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.

$250,000/$500,000 home-sale exclusion: Perhaps the greatest tax benefit of owning a home comes when a person sells it at a profit. Homeowners who lived in their home for two of the prior five years prior to its sale need pay no income tax on a substantial amount of their profit -- $250,000 for single homeowners and $500,000 for married homeowners who file jointly. This exclusion can be used once every 24 months.

14 days of free rental income: Another little known tax benefit of owning a home is that the owner can rent it out for up to 14 days during the year and pay no tax at all on the rental income. In contrast, a renter who sublets his or her rental must pay income tax on all the rental income he or she earns.

Tax benefits of renting:

The only tax benefit that a renter can qualify for by virtue of being a renter is the home office deduction. This is a business deduction available to renters who own a business and have a home office they use regularly and exclusively for business purposes.

Some employees can qualify for this deduction as well. The deduction is limited to the amount of profit earned from the business each year. If a renter pays a lot of rent, this deduction can be substantial. Homeowners who are in business and have a home office can also qualify for the deduction.

Of course, the value of the tax benefits of buying a home depends on the state the buyer lives in and his or her tax bracket. Buyers who live in higher tax states like Wisconsin get the most benefit.