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Jeremy Sheppard Blog post by Jeremy Sheppard

How does the Vendor Discount Indicate the Level of Supply and Demand in the Market?

Hi I’m Jeremy Shepherd. I’m talking about the Vendor Discount, which is one of the metrics we use at Empower Wealth when conducting our research.

The Vendor Discount is the difference between the original asking price of a property listed for sale and its eventual sale price.

So if a property is listed for sale as $500,000 and sells for $475,000, then there’s a $25,000 discount. Expressed as a percentage that would be 5%.

What we found is that a low Vendor Discount is an indicator of a market in which demand exceeds supply, and that’s going to push prices up.

Our benchmark is around 5% — so we’re looking for markets where the typical Vendor Discount is 5% or lower. The lower, the better.

Now, the Vendor Discount does have some anomalies.

For example, properties sold at auction — we don’t have an original asking price that we can compare by. Similarly, properties listed for sale whereby the price is “Offers above $500,000. So it’s not the only metric you should look at.

If you’re interested in examining other metrics that we use in our research, go to our research page.

Thanks very much for watching. Feel free to leave your comments below:

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