Shifting Gears in a Shifting Market By Beth McGuire
For Kim Rehnquist, a sales professional with Prudential California Realty in pricey Orange County, the changing marketplace is barely discernible.
“Listings may be on the market a little longer than they were a year ago,” Rehnquist says. “But well-maintained homes in desirable neighborhoods are definitely still selling.”
According to Nyda Jones-Church, chief operating officer, Prudential California Realty, based in San Diego, Southern California homes are also still appreciating—at an estimated 5-6% annually. But while a consensus from industry leaders around the country corroborates these trends, it also confirms that that the most important key to closing sales more consistently today is realistic pricing.
“The seller is always the one to set the price,” notes Dottie Herman, CEO Prudential Douglas Elliman Real Estate in Manhattan. “But today we are encouraging them to look carefully at the competition and price their homes accordingly.”
One way to do that, according to Jeff Christiana, Prudential Manor Homes in Albany, New York, is to make use of value-range marketing—a strategy that lists homes within a price range instead of at a fixed asking price. It is a strategy Prudential Real Estate Affiliates, Inc. has been using, under the title, Prudential Value Range MarketingSM (PVRM) since 1996.
“Realistic pricing is the meeting point of what the buyer is willing to pay and what the seller is willing to take,” Christiana says. “In a hot market, range pricing can enhance the bidding process and encourage a higher sale price than the top end of the range. In a slower market, it offers reasonable parameters that can help get negotiations going.”
Most important, he adds, it allows the seller to control the sale price while inviting more buyers and offers—often bringing together buyers and sellers who might otherwise not have been in the same ballpark.
“A buyer willing to spend up to $250,000 might not look at a home priced at a fixed $275,000,” Christiana explains. “But he would probably look at it if it were priced within a range of $225,000 to $275,000. The simple fact is that range pricing increases your buyer universe.”
Rehnquist, who recently sold a home in Orange County at the top end of its price range, agrees. “The buyer in this case was willing to up his spending limit because he loved the property once he saw it,” she says. “But I’m not sure he would have seen it in the first place if it had been listed at the higher, fixed price.”
The good news for sellers, according to John Maxfield, Prudential Maxfield & Company Real Estate in Boston, Massachusetts, is that they maintain control of the sale price because they are not obligated to accept an offer under PVRM any more than under traditional fixed pricing.
“The seller is only obligated to respond in writing to all offers within the range,” he says. “In most cases, that paves the way for further negotiation.”
And in the final analysis, Maxfield believes, it’s better to get an offer at the bottom of a range than to have nothing going on at all. “If the property has been listed for weeks or months and you’ve only had offers at the bottom end of the range, that’s a very telling situation. The fact is, it’s probably overpriced even within the range it’s in.”
In today’s market, with three out of four home buyers searching for property information on the Internet, Prudential Real Estate’s PVRM program helps to get properties appearing in more “range of affordability” searches. As the market softens, Maxfield points out, it may be the best way to get more buyers and sellers talking.
“The thing that you want to make sure of is that the high-end of the range is consistent with what the marketing analysis generates,” he says. “In one case recently, the CMA indicated a price of $510,000 to $520,000. PVRM has 80 distinct price ranges, and we elected to price this home at a range of $459,000 to $528,876. What happened was the low end of $459,000 drew so many buyers into the open house, and created such excitement, that the home sold quickly at $525,000, which was higher than the CMA.
We asked Maxfield whether there are some markets where PVRM won’t work as effectively.
“Not unless it’s an area where eBay doesn’t work, because there’s a lot of similarity between them,” he says. “PVRM is an opportunity for people to come in and start bidding against each other. In fact, it was the Australian idea of auctioning properties that initiated this concept of PVRM. And you can see from the success of eBay that this is a successful methodology. If eBay works in your market, PVRM will work in your market, too.”
In MLSs where no hyphens are used, Maxfield suggests putting the top of the range in the price field—but stating in the comments field that the owner will entertain offers within a range of X to X, with the high end as listed in the price field.
The key, he says, is that sales professionals who use it to their best advantage are those who see the value in a new idea, who see the potential, who see the market changing, and who are willing to get in and mix it up.
Maxfield believes range marketing—and particularly Prudential Real Estate’s well-thought-out PVRM—is an opportunity for sales professionals to distinguish themselves in their communities and among their competitors because of their willingness to challenge the status quo.
“You have to have confidence and be excited enough, and professional enough, to appreciate the art of negotiation,” he says. “You can sell it to your sellers because PVRM draws and attracts offers unlike any other program.”
According to Carlton Lund, a veteran sales professional with Prudential California Realty in Carlsbad, California, 57% of the transactions closed in San Diego County in 2005 were successfully marketed using range pricing.
Lund speaks from experience. He recently closed his 517th such transaction, and has received his company’s award for closing the most transactions using PVRM pricing for the past five years in a row.
“The concept has proven itself,” he says. “It kept us going during the last buyer’s market back in 1995, and there is no question, both for just-listed properties and for listings that have been languishing, it is truly the way to go.”
To use it most successfully, he says, you have to be the type of person who can go in and negotiate and work with buyers and sellers. “You have to love it and see the value in it—and in today’s market especially, you have to be committed to the idea of looking to get top dollar for your sellers by listing their home within a realistic range,” he says. |
