San Diego, CA. Understanding The Real Estate Listing Price High and Low Pricing or VRM.
I had an out of state Client ask me a while back what is up with all the listings that have two asking prices? He wanted to know if it was some kind of bait and switch or what the reasoning was behind it. Here is my opinion of VRM, you can be the judge.
We have all seen the first line of the MLS comments:; Seller will consider an offered price between $300,000 and $15,000,000!
Developed outside the United States and embraced by a large franchise the idea behind VRM (Variable Rate Marketing) is pretty interesting, if not a bit concerning. In fact the California Department of Real Estate (DRE) had looked into it’s use with the original brokerages and made them put together some standards. Many brokers don’t have any standards or rules and simply make up any price range that come to mind.
If the real estate market is a Seller’s Market this is probably the best argument for using VRM. By placing an asking price for instance of $500,000 to $585,000 the Seller won’t leave money on the table by pricing the home to low. Of course normal market dynamics usually will take care of this with a properly priced home which would probably generate multiple offers.
In my personal opinion the VRM model is more a tool for the unrealistic Seller.
For instance the Seller wants to place their property on the market for $675,000 but it true market value is under $600,000. By placing the home in the Multiple Listing Service (MLS) the Seller is missing all the buyer’s searching various websites since most don’t search much above the price they want to pay. If the Seller uses VRM the listing price then becomes $595,000 to $660,000 (or some variation). Now buyer’s will pick up the property in their search and may decide to see the property.
In a Buyer’s market VRM tends to sell at the lower range, or below, the VRM. In a Seller’s market it tends to sell near the middle of the range. The only reason I could see for a Seller using VRM in this market is trying to catch a Buyer on the low end of the price range and get them to the negotiation table. Frankly the only thing I think they really do is establish in the mind of the buyer the lower end of the VRM.
Again in my personal opinion this is a tool for a real estate agent that does a poor job on educating the Seller on a realistic listing price or let’s them list the property using the MLS to bring in buyers that probably would not view the home otherwise.
So before you let the agent that you’re thinking of using pull out their VRM pricing wheel, think about your goals and what really is in your best interests. It is usually best to price at market value and negociate up or down depending on the market conditions.
Here is an interesting article that ran in Realtor Magazine back in 2006.
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