Daily News

MBA Urges Regulators To Avoid Invoking Suitability Standards
The Mortgage Bankers Association (MBA) recently made a preemptive strike against what it obviously perceives as the next threat against the mortgage industry - "suitability standards." Read more...

 

Strategic pricing is where the money is

By Justin Hunter

A real estate market that is geared towards sellers does not require the seller to be too creative when it comes to advertising his or her property. List the price and they will come. Unfortunately, that market has come and gone, leaving sellers and their agents pondering different techniques to be one better than the next.

There have been many articles in the newspaper and the Internet that have been discussing various ways to market a property efficiently. But these techniques include using scented candles in the living room and finely trimming the hedges. But first you have to come up with a way for the prospective buyer to view your property, which in the last few months at least, is easier said than done.

The article, “In slow market, agents turn to creative pricing,” written by Glenn Roberts Jr. and posted on Inman News on October 26, 2006, explains a strategic way agents are listing homes prices that is creating more sales in this slowing market.

“About a decade ago, Lund, an agent for a Prudential California Realty office in the San Diego area, attended a presentation about listing properties with a price range. The practice had already caught on in Australia. The U.S. real estate market at that time was ‘very lethargic,’ Lund said. ‘I think there are some similarities today to the market a decade ago.’”

Lund recalled that at first he was reluctant to test it because at the time it didn’t make much sense but because the market was so slow he tried it. He applied a price range to a condo unit that was on the market for 93 days with no legitimate offers. Within 48 hours they received a serious offer.

“Flash forward to 2006 and about 60 percent of the sales in San Diego County are ‘Value Range Marketing’ transactions in which properties feature a price range. Sandicor Inc., a regional multiple listing service for San Diego County, allows its members to enter price ranges in the MLS.

Realtor.com, a popular home-search Web site affiliated with the 1.3 million-member National Association of Realtors trade group, accepts and displays price ranges for properties.”

Now, there is still much skepticism about Value Range Marketing (VRM). In fact, many agents are downright opposed to it. But Lund stand firm with VRM as it is even more crucial during times of a slowing market, like the current one.

Home sellers and buyers usually have a broad price range in mind before they enter an active market anyway. Internet real estate property search sites also typically users to enter a minimum and maximum price, which narrows their search.

“Using a range for pricing potentially opens up a wider audience for a home, Lund said.”

There is a method to the price ranges. You can’t just throw out a few large figures and wait to see what people are offering.

“Lund has developed a list of 99 suggested ranges that sellers can choose from to market their home, though he said these can be customized. Lund recommends that sellers pick a spread of 10 percent to 12 percent between the top price and the low price. There are examples, though, of much wider spreads that some agents use for VRM listings.”

The primary rebuttal to VRM pricing is that the seller or agent often does not accept offers within the suggested price range.

It is best to keep an open mind when offers start to trickle in, especially in the beginning of the process. After all, at least you are entertaining offers, which is more than many other home sellers can claim.

Back to Articles