Christina Hoffmann has covered real estate and homeownership for two decades, including as REALTOR® Magazine managing editor and HouseLogic.com’s content manager, with added expertise as owner of a demanding 100-year-old house. She is currently a senior speech writer at NAR.
Prudential Offices Say No to Fixed Prices
January 1, 1996
Prudential Hunter in Santa Monica, Calif., and other West Coast Prudential affiliate offices say they have a program that'll expose listings to more potential buyers and eliminate the need for sellers to set fixed prices. Or is it a crutch for salespeople who can't convince sellers what their properties are worth?
Under this optional program, market value pricing (MVP), listings are assigned to one of 40 categories of price ranges--from less than $40,000 to more than $10 million--rather than a fixed price.
"The name of the game is exposure," says Ron Salter, general manager at Prudential Hunter, which plans to inaugurate the program in early 1996. "Buyers might not even look at a property that's priced $10,000--$15,000 higher than what they've budgeted." But under MVP, Salter and others believe buyers will be more likely to view homes they otherwise wouldn't, even if the top end of the price range is out of their budget.
The program raises some questions, though. MLS data forms aren't always able to accommodate a range. And some MLSs are divided by price range, not just geographic area. So do you put a $270,000--$330,000 listing on the page with the $250,000 or $350,000 properties?
To get around that, "some MLSs have added market value ranges," says Mike Haley, senior vice president of The Enterprise, a Milwaukee-based real estate industry marketing services company that's promoting the program for Prudential. "Otherwise, salespeople enter a price at the top of the range with an asterisk. Then they write the range in the comments section, which also helps educate the real estate community about the program." Salespeople at The Prudential Arizona Realty in Phoenix are also including MVP as a feature code in the MLS, says company vice president Larry Hibler.
How's the program faring in offices that have already implemented it? Hibler reports that within three weeks of starting the program, salespeople at his company converted 210 listings into MVP listings.
Sellers and buyers like it, he says. "We had a listing on the market for 155 days, but within 72 hours of converting it to a price range, we got two offers. However, both were below the price range, so the sellers countered. Both buyers came up to the range, and the property sold within five days."
Practitioners, on the other hand, reacted negatively at first, Hibler says. "One broker said, 'We've been doing business the same way for 65 years; why would you want to change it?' But that broker wrote an offer on one of our MVP listings and sold it."
Part of the hesitation may stem from concerns about commissions. But Haley says listing brokers who bring offers at the top price of a range (and meet the terms and conditions of the contract) are entitled to a commission even if the seller doesn't accept the offer. Salespeople also need to disclose the MVP arrangement to all parties up front, Hibler says.
Is the program a crutch for salespeople who don't want to lose listings? John Foltz, a broker with Realty Executives in Phoenix, says, "It makes it easier to list properties and makes it easier on sellers. It has shifted the burden of determining price to buyers, who don't seem to like that." The system also makes it tough to prequalify people, Foltz says. "If buyers have qualified for $150,000, they might get excited about a property priced from $140,000 to $170,000, only to find they can't purchase it."
"Salespeople aren't bound to it," Haley points out. "It's just another tool. Most salespeople are stuck with one seller who's insistent on overpricing, so this is an out. It also invites buyers to make bids and lets salespeople negotiate, which is what they're supposed to do."
For now, Foltz is just waiting to see what'll happen. "I'm a great believer in the marketplace. It'll tell us whether people want market value pricing as part of their menu of options."
The Prudential Real Estate Affiliates, the parent organization of the affiliates, plans to expand the program from the West Coast to its offices around the country in 1996.
Senior Speech Writer
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