Days on Market: The Exit Cost Your Model Leaves Out

Sellers now outnumber buyers by 563,000. Days on market underwriting turns slow exits into carry, price cuts and concessions you can see in the model.

Re:InvestorHub Team · · Deal Analysis

Days on market underwriting means treating the time it takes to sell as a priced input, not a footnote. Your model almost certainly assumes the exit clears at the modeled price on the modeled day. In August, Redfin counted an estimated 1,534,918 sellers against 972,300 buyers, a gap of about 563,000 and the widest in its records, which go back to 2013. When the gap is that wide, the cost of the exit shows up as time: carry months, price cuts, and concessions. This article rebuilds the disposition line to include all three, then runs a flip and a hold at modeled and stressed days on market. It covers the modeling side only. For whether to sell a rental at all, see our sell vs hold framework.

Why does the exit cost more than it did a year ago?

Demand is thin on the buyer side while supply keeps climbing. Redfin put the August seller surplus at 57.9 percent, up from 52.1 percent in July, with active listings at their highest level since the start of 2020 and the count of buyers near the lowest on record. Its four weeks ending September 13 report showed pending home sales at their lowest level in nearly three years.

Prices are holding better than time is. Redfin reported the median sale price up 2 percent year over year, and the typical home that sold spent 46 days on the market, unchanged from a year ago. Zillow's August market report says the same thing from another angle: newly pending listings fell 2.6 percent year over year, and 26.3 percent of listings carried a price cut. The headline price is steady. The people paying for that stability are sellers who wait, cut, or concede.

What number should you use for days on market?

Not one national number, because three reputable sources measure three different things and report three different answers for August.

Pick the definition that matches your exit. A flipper needs listing-to-closing, so take the contract clock and add your own closing period. Then check your zip code: Realtor.com found days on market rising in 25 of the top 50 metros in August, with Boston up 6 days and Baltimore and Cincinnati up 5 each, while Jacksonville fell 9.

What goes into the rebuilt disposition line?

Replace the single "sale price minus selling costs" line with four components, each tied to days on market.

  1. Carry for the days listed. Monthly interest, property tax, insurance, and utilities multiplied by months from listing to closing. Every extra 30 days costs one more month of this number.
  2. The price cut. A percentage off the modeled price, taken once the listing goes stale. Zillow measured 26.3 percent of listings with a cut in August, and Realtor.com measured 20.4 percent, so size the haircut to your submarket, not to a hope.
  3. The concession haircut. Redfin found sellers gave concessions in 44.7 percent of August sales, measured over the three months ending August 31, the highest share for that month since at least 2020. About 15 percent of buyers got both a concession and a price cut. In Atlanta the concession share reached 72.8 percent.
  4. Selling costs on the lower price. Commission and closing costs are percentages, so recompute them on the new price.

How does a flip change at modeled versus stressed days on market?

Here is a hypothetical example, not a forecast. You buy at $210,000, spend $50,000 on the rehab, and model an after-repair value (ARV) of $300,000. After the rehab, carrying costs run $2,000 a month (loan interest, taxes, insurance, utilities); carry during construction is already in the rehab budget. Selling costs are 6 percent of the price. Total cost basis before carry and selling costs is $260,000.

Modeled case: 46 days on market plus 30 days to close is 76 days, rounded to 2.5 months. Sale price $300,000, selling costs $18,000, carry 2.5 x $2,000 = $5,000. Profit: $300,000 - $18,000 - $260,000 - $5,000 = $17,000.

Stressed case: 90 days on market plus 30 days to close is 120 days, or 4 months. You take one 3 percent price cut to $291,000, and the buyer asks for a 2 percent concession ($5,820). Selling costs are 6 percent of $291,000, or $17,460. Carry is 4 x $2,000 = $8,000. Profit: $291,000 - $17,460 - $5,820 - $260,000 - $8,000 = -$280.

A $17,000 flip became a $280 loss without a single change to the purchase price or the rehab. The $17,280 swing breaks down as $8,460 of net price cut, $5,820 of concession, and $3,000 of extra carry.

How does a hold change when you have to sell?

Leverage makes the exit more sensitive on a hold, not less. Here is a second hypothetical: a rental you bought at $250,000 and plan to sell in year 5 at a modeled $290,000. The loan balance at sale is $175,000, the unit is vacant while listed, and carry (mortgage payment, taxes, insurance) is $1,800 a month with no rent coming in. Selling costs are 7 percent of the price, including commission, closing, and transfer costs.

Modeled case: 76 days, rounded to 2.5 months. Price $290,000, selling costs $20,300, loan payoff $175,000, carry 2.5 x $1,800 = $4,500. Net proceeds: $290,000 - $20,300 - $175,000 - $4,500 = $90,200.

Stressed case: 120 days, or 4 months. A 4 percent price cut puts the price at $278,400, and a 2 percent concession is $5,568. Selling costs are 7 percent of $278,400, or $19,488. Carry is 4 x $1,800 = $7,200. Net proceeds: $278,400 - $19,488 - $5,568 - $175,000 - $7,200 = $71,144.

Proceeds fell $19,056, or 21 percent, from a 4 percent price move. The loan balance did not shrink when the price did, so the entire drop came out of your equity. If the stressed number changes whether the hold is worth doing, the sell vs hold framework takes that decision from there.

Which assumptions should you stress first?

Start with the ones your own deal controls. Pricing the listing at the right number from day one is the lever Redfin economist Asad Khan names for sellers: "sellers who want to find a buyer quickly should price competitively from the start." For a flip, the margin you started with matters too; flip margins recently rose for the first time in seven quarters, but a margin that thin erases fast at 120 days. On the buying side, how to write the offer when sellers cut covers the other half of this market.

What should you change on your next deal?

The full framework these lines sit inside is in how to analyze a real estate deal. The exit line is where it most often goes missing.