Home Buying in Irvine>Question Details

Anxious Buyer, Home Buyer in Irvine, CA

Why do realtors list homes with range pricing, knowing that their seller will not take the price at low range?

Asked by Anxious Buyer, Irvine, CA Sat Mar 8, 2008

We put in an offer in at the low range level and the seller countered at mid point to high....stating FIRM. We walked away. Just don't understand why the seller would allow the broker to list this way when they would never take the price at the low level point. Seems like a waste of time for everyone. Thanks.

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It never made a lot of sense to me either, but to each their own. I had one seller insist on VRP, but that is the only time I've had a listing like that and the range was about 20 grand. It has to do with the theory of trying to expose the property to more buyers.

The only problem with that theory is how the MLS actually works. Let's say you Value Range a Property from $699,000 - $775,000 and we assume the seller wants $750,000.

Buyer A is searching for homes up to $700,000. Yes, the property shows up on their search sheet, but when the buyer looks at the list, the home's price shows as $775,000 among all the other up to $700,000 homes because the MLS always advertises the high end of the range . Everytime a search site (like Realtor.com) pulls info from the MLS, it will show the high side first if it even shows the low end at all. (How does it attract more buyers if it doesn't show or shows for someone who isn't looking to pay that price ???

Now the seller has attracted a buyer that has no intention of buying anything over $700,000 when the seller's goal is $750,000. (If the buyer is willing to pay $750,000, then that is the price they will search.)

On the flip side, you have Buyer B searching for homes up to $800,000. $775,000 pops up and then Buyer B clicks on the detail sheet and now sees the "Value" Range price below $700,000. No buyer in today's market is going to pay more than list... And Guess what? The low end of the Value Range is the list price...

I think Value Range Pricing has a purpose, and in my opinion it is to ease the seller into a price reduction down the road. A better strategy is to price it properly in the beginning with a company that can offer you REAL Marketing & Advertising. Time is money in this market.

(If anyone can show me that it does generate more money for a seller, I'd be willing to revisit and or retract my opinion. As it stands today, I've never seen any proof.)
Web Reference: http://www.OCBeachBlog.com
2 votes Thank Flag Link Mon Mar 17, 2008
Because it's just a marketing scam very similar to the old "bait and switch" routine. It's become blatantly obvious that real estate is a Ponzi scheme and the game is over. When the supply of greater fools evaporates, the whole house of cards comes tumbling down.

That is exactly what is happening right now. No amount of realtor/mortgage broker lies can re-inflate the bubble. When bubbles burst, they are done for a long time.

Anyone buying a house now is a sucker in my opinion.
2 votes Thank Flag Link Sat Mar 8, 2008
Anxous Buyer, The reason for value range pricing is many fold. It comes originally from Australia. The idea has many facets. One reason for using VRP is that it brings in more buyers for the seller. If you tell your agent you don't want to spend more than 600K, and he takes you to a home that is 650K you are not going to want to see the home. However, if the home has a VRP of 600-700K you will go to look at it. The bottom line is, the more people who walk into a seller's home, the more chance someone will want to buy it.

Another benefit to VRM pricing is in a heated market, like we had a few years ago, frankly we never knew from day to day what the value of a proprty was! A house today might sell for 50K more than the house next door did yesterday. VRM helped by encompasing yesterdays price, with a price a bit higher, and then buyers would start their "bidding process" on the property.

In a more stagnant market like we have today, sellers don't have to do a price reduction as quickly on the property- the reduction is already built into the VRM.

Research has shown that sellers statistically receive more for their property when Value Ranged.

I usually tell my buyers to assume that the seller wants a price in the middle of the range, however, if the home has remained on the market for a period of time they may take the very bottom of the range. I don't know it this explanation is helpful to you- but that is how it works.

As was already stated- no matter what the price is on a home, you need to know the comps, what is going on with the market in that particular area, and make your offer accordingly. I would suggest that you have your agent draw up a letter, with supporting comps as to why you are making the offer that you are making, and why the seller should consider it seriously. That has worked for my clients many times in the past.

You can't do anything about the seller, except have a stron negotiating agent to help you!

Patti Phillips
800-680-9133
2 votes Thank Flag Link Sat Mar 8, 2008
I think we are going have to agree to disagree on this one as far as whether we use this strategy or not with our sellers. I choose not to.

We do seem to agree on at least one purpose though... "sellers are more likely to see the true value of their home (rather than the hoped-for price.)"
Web Reference: http://www.OCBeachBlog.com
1 vote Thank Flag Link Tue Mar 18, 2008
As stated below, VRM encourages buyers in a lower price point to view properties with VRM. I like the program, as it permits sellers in a declining market to keep their properties "active"- in a market that is going down, sellers are more likely to see the true value of their home (rather than the hoped-for price). If the house is priced just right (a moving target in some areas at this point) there is likely no need for VRM.
Web Reference: http://optionsrealty.com
1 vote Thank Flag Link Tue Mar 18, 2008
Sandra actually in the market around here there are more and more multi-bid properties due to short sales as well as Value Range Marketing. In a "buyers" market it puts a bit of strength back in the sellers control. If a buyer is truly paying attention to the value of properties around a Value Range Marketing property they would know what the value of a property is and be able to make an educated offer.

Also I've found that it's more than just the $$$, it's also the amount of deposit, contingencies and timeline. VRM just allows the seller to have more options when it comes to offers.
1 vote Thank Flag Link Mon Mar 17, 2008
Great answer Patti. You nailed it. I work for Prudential Prime Properties Wolfson Cutler Real Estate and we use Value Range Marketing (PVRM). It's been around for a while and is showing to be quite useful in this market. It does take some education on the part of buyers and their agents alike. As with all offers it's more than just price that is taken into consideration, it's also the other terms and conditions as well. Proper comps & justifications are always going to be important.

Another comparison to this situation would be a short sale or auction situation. The starting point may be low to invite offers to negotiate. Some buyers are uneasy with Value Range Marketing because there's no fixed price stated from the owner. Many sellers like this method as opposed to "chasing the market" with price reductions especially with all the short sales and auction properties out there.
Web Reference: http://www.Medfordhouse.com
1 vote Thank Flag Link Sat Mar 8, 2008
I'm not familiar with VRP; I haven't seen it used in my area. And, from the descriptions below, it doesn't thrill me. Sounds kind of like those car ads in the paper: An X300 WheelieMobile for just $16,999. But you try to buy it at that price. Well, there's tax. Dealer prep. Delivery charges. Marketing fees. Now we're up to $18,500. Want a spare tire with that? Something better than a 3-speed manual transmission? Now we're up to $21,000. Well, we have this nice orange and brown one on the lot. If you want any other color, we'll have to get it from another dealer, and there's a fee for that. You get the picture.

Anxious, I'd have done exactly what you did. Now maybe a silver-tongued agent in a warm market can upsell someone from the low range to the high range. But many can't, and this sure isn't a warm market any more. The tactics you describe are bound to create ill will.

Just my take on the matter.

Good luck.
1 vote Thank Flag Link Sat Mar 8, 2008
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
Contact
We haven't used VRP in this area for quite a while. It was something that was used a lot in Southern California and I believe it was started by Prudential. It never really caught on much. It was a great enticement to get buyers to view the property.
1 vote Thank Flag Link Sat Mar 8, 2008
Pam Winterba…, Real Estate Pro in San Ramon, CA
MVP'08
Contact
Anxious buyer,

First off, you need to be doing your homework 3 or 4 months in advance before making any offers ....

Second, you should have 5/6/7 homes that you've researched and are ready to make an offer on - not one ..... if everything was done correctly, good rapport with the agents (and the seller) and you weren't firing darts at 800lb gorillas, then who cares what his "FIRM" price was ..

It doesn't make him right and it doesn't make him wrong - you just don't agree ... sometimes the seller can get some very bad information from their agent, and sometimes the seller is a blockhead.

Good luck and - move on ......



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1 vote Thank Flag Link Sat Mar 8, 2008
Scott, I completely believe that you have multiple offer situations with properties that are Short Sales. We are having double digit multiple offers on them out here. In my area, (your location in Medford might be different), but it has more to do with auction pricing than VRP. ( When was the last time you saw a VRP at an auction???) Again, I would be more than willing to change my mind if someone showed me proof or statistics of some sort that it works.

I personally feel that it sets up a conflict in perception between a buyer and seller that doesn't need to be there from the beginning. It's about price, terms and comps regardless of whether it VRP'd or not.
Web Reference: http://www.OCBeachBlog.com
0 votes Thank Flag Link Tue Mar 18, 2008
Patti gave an excellent accurate answer. I am confused about the TD she received. We don't have the ability to put a price range in, but would fully support that option. If a seller is recieving many showings, he/she may be more inclined to believe that an offer in the higher range may materialize. If market response is weak, that might encourage the seller to entertain offers at the lower range.
0 votes Thank Flag Link Mon Mar 17, 2008
Deborah Madey, Real Estate Pro in Red Bank, NJ
MVP'08
Contact
I agree with you, the Real Estate agent should not take a listing unless their is a good chance it will sell. If all Realtors took that stance, homes would not stay on the market for long periods of time and depress the over all market. Some Realtors take the listing and hope the seller will get tired on not getting an offer and they will drop their price. That takes 6 months, way to long.
0 votes Thank Flag Link Mon Mar 17, 2008
VRP........?

I can remember that old marketing "plug" being used in the first days of development of Port Charlotte and Charlotte Harbor .... that was 25 years ago.?

They used to fly the retiree's down for free and drive them from zone A ($5,000 for that lot ) to zone B ($3,500) then zone X out with the alligators for $2,200 etc, etc ....


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0 votes Thank Flag Link Sat Mar 8, 2008
Range pricing is used to attract buyers to a home. You can't sell a home that no one has seen. Home buying is also an "emotional" buy for most who will pay "just a little more" for what they want. This is a buyers market, so keep trying and keep looking.

Joe Homs
949-625-4533
Web Reference: http://www.joehoms.com
0 votes Thank Flag Link Sat Mar 8, 2008
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