Homes on the "Range"

[Garner]

VRM is a marketing tool---- The property is listed at single price and the seller gives permission to advertise that they are open to negotiations within a set range.

Following are ESSENTIAL, KEY concepts to this strategy.

• A CMA (comparative market analysis) is done to determine and recommend to the seller, an ?approximate? value for a property. (No difference than ?single priced? offering.)
• If seller agrees to allow VRM to be used as a marketing tool, the property is placed in an appropriate range for marketing and advertising. The seller, selects a range from a pre-determined set of price ranges. (Our research has shown that pre-determined price ranges are more effective.)
• A listing contract is completed and there is only ONE list price filled in the blank of the listing agreement---(No difference than ?single priced? offering.) The list price is the high end range number. (i.e. if the marketing range is $599,000 - $698.876. then $698.876 goes in the blank.)

With regard to the question of whether a seller will indeed accept offers at the lowest end of their range---there is no definite answer, just as there is no definite answer with the current ?set priced? listings. It is a hypothetical question just like the one Realtors? are asked everyday by buyers and other Realtors? alike ---- ?what do you think the seller will take? ? Our response should always be ? the best way to find out is to make an offer, put something on paper and let?s present it to the seller to ??open the negotiations. In the current ?fixed price? system, as well as in VRM until the seller actually accepts or rejects an offer the Realtor? doesn?t really know what the seller will accept or not accept.

VRM is simply another means to get a buyer and seller to open dialog, to bridge a gap between expectations and possibly to allow another means of exposure to a property that would not have otherwise been considered by a buyer.

 

[Smiling JOe]

...

VRM is simply another means to get a buyer and seller to open dialog, to bridge a gap between expectations and possibly to allow another means of exposure to a property that would not have otherwise been considered by a buyer.

I thought that was part of the job of Realtors. At least I make it a part of my job.

 

[Indigo Jill]

This whole VRM strategy is so convoluted to me. I understand the need to be innovative in the industry - because real estate is financially easy to break in to, it's become over-saturated with Realtors and therefore ultra competitive so you need to find ways to distinguish yourself. But IMO, this is not the way to do that.

What happened to the day of just pricing your property at it's Fair Market Value and letting the process evolve naturually between the buyer and seller? Why confuse the negotiation by saying "Well, the seller may sell in this range, but I can't be 100% sure but go ahead, buyer - give it a shot." I think it wastes everyone's time. It's the seller's perogative to negotiate or not - but it's the job of the Realtor to get them to be honest about the process, the terms, the pricing and set the boundaries at the time of listing so when buyers do show up, the guidelines at THAT point can be communicated and the buyer can decide if they want to proceed or not.

In all respect, I just think VRM fundamentally is a cheesy tactic - and the fact that is being called a MARKETING tactic is even worse to me (I was in real estate here for 3 years and I was almost exclusively focused on marketing, not sales, as that is my background so I'm comfortable saying that statement). It really communicates to me that it releases the Realtor from the responsibilty of having to maybe have those difficult conversations with less than ideal Listing Customers who have their head in the clouds about the realities of selling. Remember, real estate is sales - and as a Realtor, you aren't just selling the real property. You are also selling your expertise to your customers and that expertise SHOULD entail being able to set the Fair Market Value of the property from the get go and, if necessary, arguing the point as to why it's that price to the Seller that doesn't agree with you. And if your potential seller still thinks you are smoking something once you have shown them the facts? WALK - no RUN away quickly.

 

[Indigo Jill]

In the current ?fixed price? system, as well as in VRM until the seller actually accepts or rejects an offer the Realtor? doesn?t really know what the seller will accept or not accept.

I argue that it IS the job of the Realtor to know this about their Seller. If you don't know the answer to this, why would you take the listing in the first place? The business is challenging enough - not knowing the answer to this, IMO, is terrible for one's business. Realtors function without a guarantee of being paid or not - not knowing this crucial information makes it a bigger gamble.

VRM is simply another means to get a buyer and seller to open dialog, to bridge a gap between expectations and possibly to allow another means of exposure to a property that would not have otherwise been considered by a buyer.

But if the property is priced correctly, this would be a moot point. A buyer sets their own range. Hoodwinking them with a "range" to attract them - which you are saying isn't always what a Seller is willing to accept on the low end anyhow - is SUCH a bad business model and comes off as bad as the tactics used by car salesmen (sorry car salesmen:roll: ). It is implying to me that Seller's are being encouraged to set unrealistic prices.

 

[Bobby J]

Davis Properties. I know I already said welcome but I am doing it again! Welcome and oh yeah, tough crowd!

 

[Indigo Jill]

I just re-read my post(s) and realized I must've been having a particularly negative day . I did come off as very aggressive on my position, and, although I don't apologize, I suppose I couldn't been ... well ... less aggressive. I guess my 3 short years in the business here soured my view of the profession in general - Realtors are their own worst enemies. Anyhow, all of the best of luck to you, DavisProperties, as you are obviously doing something right.

 

[Garner]

When we decided to give our customers the option of trying Value Range Marketing (VRM), we knew that it would not be without controversy. That's OK. A major reason for starting this thread on Sowal.com was to start the education process on VRM.

One thing that we've learned from this board is that we need to be extra careful that potential buyers for any of our VRM listings do not feel anything close to a "bait and switch." It is absolutely not the intention of Davis Properties to put anyone off or to lend any kind of mistrust to the process.

Total transactions of residential real estate in the 30-A area for the first 7 months of 2006 are down 77.7% from the first 7 months of 2005. From January through July, 2005 there were 590 lots, 243 condos and 327 homes sold, for total of 1160 closings. In the same period of 2006, there were 72 lots, 94 condos and 93 houses, for a total of only 259 closings.

It is time to take risk, to think outside of the box, to try a different road. That's what we're doing at Davis Properties!

 

[Smiling JOe]

Davis Prop,
As Bobby J says, this is a tough crowd. I think one of the pluses of you posting VRM info here on SoWal.com is that you will know many of the questions which the public and other Realtors will have, when they see your listings. This is a good place to talk about, no matter what reactions may be.

 

[Franny]

We're selling real estate, not cars.

"We're selling real estate, not cars."

Thank you for that quote! Prudential Real Estate has been using VRM for about 11 years now and doing well with an educated audience. I believe this thread is the beginning of educating buyers/sellers on VRM.

 

[Cork On the Ocean]

I knew Sowal would have something. I was approached by one of my sellers today regarding the concept. I'm a numbers/data girl as you know so did a little research.

As Franny says, this is a concept that Prudential has been using for some years and I'm finding much positive praise primarily from Prudential realtors.

As I understand it, one method of application would be as follows: Seller wants $500K. The range that might be established is $480-$520. Buyer offers $480, Seller counters at $500K. Buyer feels like they got a deal, Seller got his price.

A second application might be that seller wants $520K. Buyer offers $480K. Seller counters $515 and offers go back and forth settling at about $500K. Listing agent was able to get an offer presented and able to get the seller to go down on what they wanted for the price.

For my sellers, I would feel better about scenario #1 as my job is to get them the highest price possible. For my buyers, to be honest, I'd probably find a comparable property, lowball the heck out of it and start negotiations on our terms rather than being limited by the bottom end of the VRM property ( I understand that it's not necessarily the bottom but the perception is there)

Our sales this summer when we had the buyer have been 75% - 85% of asking which would be lower than the recommended +(-) 5-10% that
online proponents of VRM are recommending. So an experienced investor is going to realize this and it probably won't have much impact on inducing an offer from them. But it might for a novice investor or end user.

I'm certainly open to anything that's in the best interest of my sellers or buyers. I might even present this option to a couple of my sellers who are really desperate right now so I'm certainly not dissing the concept but I agree with the poster who categorized it as simply another marketing angle. Much like auctions in my mind. It places a carrot out there for both buyers and sellers and just as with attorneys, he who has the strongest negotiator wins.

For a less subjective viewpoint, there has been a study done on VRM by The Journal of Real Estate Finance and Economics. I would love to see the entire study but don't know if I'm gonna fork up the $40 for it. Anyway, the abstract conclusion was :

"Two staged least squares with a correction for sample selection and Weibull duration models are used to test the hypotheses, employing a sample of 5,852 residential houses that were sold during the period January 1999 to December 2000. In contrast to claims of the strategy?s proponents, the results indicate that houses take longer to sell when using the range pricing strategy after controlling for physical characteristics and market conditions. Furthermore, there is no evidence that this strategy has any significant impact on transaction prices."

If anyone has this study, I'd love to see it.

In addition to the above findings, NAR published an article noting the following concerns:


John Allaire, CRS?, GRI, broker-owner with Easton Real Estate LLC in Easton, Mass., says when a solid offer is not accepted, buyers become confused and upset. As a result, deals and professional reputations can become tainted.

?Buyers feel that if they?re making an offer within that range, it should be accepted,? Allaire says. ?If the range is $500,000 to $540,000, and the buyer offers $520,000 but the seller says, ?No,? some buyers feel like it is a bait and switch, where they are lured in with what looks like a decent price but then told they can?t have that price. So it affects everyone involved in the sale and can leave a lot of negative feelings.?

No matter what the terms, Helga Struffert, GRI, owner of Lakeview Estates & Realty Inc. in Carson City, Nev., says price ranges make practitioners look unsure at best.

?To list a price range does not accomplish anything but establish the bottom price a seller will accept and it?s therefore meaningless,? Struffert says.

In all fairness, supporters are quoted in the article with positive results:
http://www.realtor.org/rmomag.NSF/pages/feat2jan06?OpenDocument

I'm not trying to be overly negative but I do want to see the negative as well as the positive. Just like all of the realtors on the board, I would have concerns about gaining a reputation as the "bait and switch" broker and our reputations are paramount in this business.

I'd really like to know if and when any VRM properties sell. I did a quick study of my own and I'm not sure when VRM was implemented by local brokers but I couldn't find any contracts on VRM properties since 1/1/06 so I need to do a little thinking on whether I want to offer such an option to my sellers. I do however wish Davis and any others using VRM much luck in this market and if we do get a buyer that's interested in one of your listings, we might just get to go to the negotiating table and try this out. Best Regards,

Cork