Range Pricing-What, When, and Why?
March 20th, 2008 categories: Real Estate 101
What?
Range Pricing, also known as Value Range Pricing and Value Range Marketing(tm), establishes, as it’s name implies, a set value range for asking price, i.e. $445,000 to $495,000. And, because this approach does not reflect a specific price point, such as, $485,000, as is more common to what the consumer would expect, this approach has its critics. But, it has many proponents as well. At the very least, it does bring up questions.
Why?
The answer is really quite simple. To attract as much “action” (prospective Buyers) to the property in the fastest period possible, with the ultimate goal of generating a bonafide offer that results in a sale. That is what the Seller wants and it is what they expect their real estate agent to help them achieve. O.K. That makes sense, right?
But, why would the value range approach accomplish this task faster than “traditional” pricing?
The idea, again, is that the more traffic a home gets, the faster it will sell. By attracting Buyers at the lower end of the range, this goal, in theory, is accomplished. And, value range pricing is designed to attract a larger pool of qualified Buyers than would typically be looking at a set priced listing by getting Buyers in the door who are qualified to purchase at both ends of the range.
The critics perspective is that no one would offer more than the lower end of the range. And, that seems like a valid point, even to me. But, in areas where this approach is popular (particularly in the San Diego area), the numbers seem to show that they do.
Like many other agents-especially in this region, I have grappled with the validity of this approach as a tool to marketing property.
What I have concluded, is that there are circumstances that it could be beneficial. And, other circumstances that it would not. First, because this approach is relatively new to our area (Chico, Paradise, Oroville, etc.), explaining the concept to folks who have never heard of it, could be difficult and, could result in confusion in the market place, which would not be good (it can be tough to break new ground).
My other concern is that, in my opinion, the Seller should genuinely and seriously be willing to consider all offers in a particular range and treat all offers on their face. So, if an offer comes in at the lower end of the range, the Seller should be in a position to accept it. They certainly don’t have to. But, they should be willing to engage the Buyer just as they would if they were to receive an offer on a traditionally priced home. Otherwise, it could easily be perceived as a, “bait and switch”, that could result in damaged reputations, wasted time, and perhaps even delay in the sale of the property.
When?
A good example might involve the pricing of a newly contructed home that has numerous “non-traditional” upgrades and amenities that are not common to the market. However, neither the front or back yards are landscaped. It is located in a developing area of unique homes. So, price is difficult to determine. The lower end of the range is very near the bottom of other sold comparables in the area. The high end, is below others. The owners are motivated and facing a declining market and willing to deal at the bottom end of the range if other terms of the offer are strong. These could be things like, cash offer, short escrow, large deposit, etc. But, they would also be willing to provide a buyer things like credits for closing costs and landscaping, if an offer were to build those items into the range price, hopefully, appealing to a greater pool of Buyers with a variety of circumstances.
