h1

VRM Doesn’t Work in a Buyer’s Market

November 27, 2007

I’m amazed at the amount of VRM, or Value Range Marketing, listings I continue to see in our area despite the indisputable buyer’s market we are currently in. VRM is where a listing agent sets a “value range” for the price of the listing. My favorite is something like this…”Seller will entertain offers between $420,000 and $460,000″. Usually this is a listing that has been on the market for about 180 (or more) days and started off way back when at around $500,000. The truth is the sellers will “entertain” a warm body showing some interest in their OPT (Over-Priced Turkey). Unless you have buyers fist fighting each other and walking over fallen bodies to get their offers in first (remember those days???) VRM simply says “we want SOME KIND OF OFFER and it would be really great if it was AT LEAST $420,000….pretty, pretty please.”

I recently had a case where my buyers put in an offer on a property that was VRM’d. Keep in mind when consumers see a VRM listing on Realtor.com or other online sources, they DO NOT see the VRM details usually. They only see the $420,000 price. It’s only when you open the listing and read the details or comments when you see the disclaimer “accepting offers between $420,000 and $460,000”. So immediately the consumer assumes they are looking at a listing for $420,000. Maybe they capped their serach for properties at $425,000 and this one came up. My buyers did just that. And quoting my buyers, verbatim, “Mike, this property has been on the market nearly 6 months and has steadily dropped the price since then….it doesn’t appear that they are getting any offers, so why would we offer them anything higher than the $420K???? As a matter of fact, we want to offer them $400K.” Now understand these are “golden” buyers….nothing to sell, well-qualified, flexible closing date, the whole nine….In my opinion as a Realtor and a Certified Appraiser, the property is worth more than $400,000 (slightly) but I agreed they had nothing to lose by being aggressive with their offer. The other thing they had going for them was that they didn’t LOVE the property. It was serviceable and did the job, but they didn’t HAVE to have it.

We got pretty close to a meeting of the minds before Thanksgiving and I’m not convinced the deal is dead yet. We’re negotiating below the low end of the VRM. Both parties may need to budge slightly for a “win-win” but the point is, in the current market (at least locally) using VRM on your properties sets your bar low. If the listing, like most of them these days, is priced a little (or a lot) too high to begin with, the VRM tactic will simply lower the bar for eventual offers. Over 80% of buyers start their search on the internet and if they’re seeing your listing at $420,000 only to learn it is “value range” priced at $420,000 to $460,000 that’s perceived as nothing more than a sleazy bait-and-switch technique perpetuating the stereotype of the shady real estate agent.

Be pro-active. Price your listings accordingly. Use your expertise to show your motivated sellers where you need to be to sell in 60 days, 90 days, 120 days, etc…Don’t trick buyers. Don’t try and “buck the market”. The data doesn’t lie. As coach Belichick likes to say, “It is what it is”. You are doing your sellers a disservice using a VRM today. It’s a wimpy way to get a price reduction. “You see, Mr. and Mrs. Seller we are actually saying that we will entertain offers between $420,000 and $460,000” when in actuality you just lowered the listing price to $420,000.

And save the VRM for the eventual return of the Seller’s Market (it will return, not sure when, most likely not too soon, but eventually…). Then those poor buyers fist-fighting and crawling over each other to get their offer to you first will have a good idea of where to start the bidding war.

Advertisements

One comment

  1. Right on brother! Tell it like it is!



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: