The New Ultimate Listing Presentation – DOM Standard Deviation
Becoming the market authority is job one.
The next piece of market data I want you to learn is the standard deviation of the average days on market.
DOM Standard Deviation (STDEV). What ?! I know what you're thinking: "Matt Jones has lost his mind!" But, before you dismiss this concept (and me) as crazy, let me point out that it will be an easy statistic to calculate and a powerful advantage for you once you know it. What if you could actually know the odds of selling a client's home in 30 days … or 60 days … or 90 days? Wouldn't that make advising that client a lot easier? Well now you can! And it's easy.
As a listing agent, one of the questions I was often asked by sellers when I was a listing their home was, "How long do you think it will take to sell my house?" As a new agent I struggled with this, and I did a lot of research to see if I could find the formula to calculate sale probability. Sure enough, I eventually found what I was looking for. I needed two pieces of information to make the calculation.
First, I needed the actual DOM for the area. I just showed you how to calculate that. Then I need the standard deviation of that DOM. The standard deviation of the DOM? How do you calculate that? It even sounds hard!
The easiest way to calculate a standard deviation of the DOM is by using a spreadsheet like Excel. Pull up all the closed residential properties for your community from the last year from your MLS. Then copy and paste that data onto a spreadsheet. Then use the formula in Excel to compute the standard deviation for the DOM column. If you're using Excel, the function will look like this: = stdev (b1: b20000).
If you are like most agents, by now your eyes are starting to glaze over, and your mind is going blank. You're probably thinking, "If I have to do all that stuff, I really don't care about the odds!" And because I know that's what most agents are thinking, we designed a calculator to do the math for you. All you need to do is type in the average DOM, then the days you want to calculate … like 30, 60, 90 days, etc.
I'll give you an example. Let's assume the actual DOM is 240 (like it is right now in my market). In a matter of a few clicks, here are the odds of a home selling:
30 days – 10.1% 60 days – 13.7% 90 days – 18.3% 120 days – 23.4% 150 days – 29.3% 180 days – 35.8% 210 days – 43.1% 240 days – 50.0% (Remember, this is the average DOM.) 270 days – 56.9% 300 days – 64.2% 330 days – 70.7% 360 days – 76.6% 390 days – 81.7% 420 days – 86.3% 450 days – 89.9% 480 days – 92.7%
Now let's say that a competing agent tries to convince your client that his home can sell in a matter of days. You can tell your client with complete certainty that the chances of selling his home in a few days are nil, and that in reality he should be mentally prepared for at least an 80% probability, using a traditional approach. In the example above, that means just over a year. Fortunately for your client, you have an approach that will sell it in half that time.
When you can show your client, with authority, how long it will take to sell his home, he'll inevitably respect your honesty and the fact that you know exactly what it takes to sell a home in your market, even if he doesn ' t like the hard facts. He knows that you're not guessing, like most agents, and in fact you're speaking with the voice of authority. Knowing your market better than any other agent will impress your clients while also giving your own confidence level a boost.
I saved the very best for last. Of all the calculators we've developed, this one was the most difficult, but it's also my favorite because it will give you information nobody else has, and that will win you the listing time after time. You'll love it! Simply put in the accurate Days on Market and the number of days to estimate, and you will instantly know the statistical probability of selling and home within that time frame.
Okay, using the illustration above, you could inform the seller that he has only a 35.8% probability of selling his home in 180 days, using the traditional approach, and that it will take a full year to reach an 80% probability of selling. And if that's how long, statistically, it'll take to sell his house, then listing it for ninety days, or even 180 days will clearly be a waste of everyone's time.
Now, your immediate reaction may be that your clients will never go for this system – yet they will! In all but one of my listings I received one-year terms, and in the remaining listing I got a six-month term, knowing that I would sell the house even sooner. When you tell a client, with authority, how long it will take to sell his home, he'll inevitably respect your honesty and the fact that you know exactly what it takes to sell a home in your market. You're not guessing, like most agents, and in fact you're speaking with the voice of authority. Knowing your market better than any other agent will impress your clients while also giving your own confidence level a boost.
In the next segment, we'll discuss the final pieces of market data I want you to learn in order to truly become "the market expert" or authority. I think you'll find that they are much easier to understand than standard deviation of the average days on market!
Until then, work on getting your technology and advertising in place, so that when you've mastered all the data, you have a pipeline of business with whom to share it. Next we'll discuss average markdown and the list to sale ratio as well as the market climate and number of buyers in the market, so you won't want to miss it.