Value Range Pricing – Why it Works

home valueBack in the day, pricing a home for sale involved choosing just one price. Since literally dozens of factors influence a home’s value, identifying one single price which is meant to precisely reflect the value of a unique-in-all-the world home seems kind of crazy to me today.

I’ll admit when I first heard the idea of a range price, my initial reaction was it was the craziest idea ever. (Why would anyone offer more than the low price in the range, right?) Then I learned that the home seller was not obligated to accept any price in the range. That didn’t make it seem less crazy. Or did it? A buyer’s offer, even one at the bottom of the range, is necessary for a home to sell. A Buyer makes an offer, the Seller accepts or counters, and after a round or two of negotiation, the home sells – or not. But if there is no initial offer, there is no sale.

Range Pricing Increases Exposure

Range pricing results in far greater market exposure for the home. Home buyers and agents search in ranges already. A home buyer who wants to pay $700,000 for a home doesn’t search for all homes priced at $700,000. They might search in a range of $675,000-$725,000 if they want to find a home they can buy for $700,000. The range allows a property to be found in searches which include the bottom or top prices, or anything in between. A statistic reported shortly after the inception of the range concept showed that homes would be found in five times as many searches as a fixed price property.

It’s easy to make mistakes when choosing a fixed price for a home – pricing too high or too low are the big ones. And how often do you see a price ending in 900? $799,900 sounds so much more attractive than $800,000, right? Except that a buyer searching in a range of $800,000-$850,000 doesn’t even find that property. That hurts both the seller and the buyer. Bracketing the likely sale price of a home with a high and low price dramatically reduces the odds of a pricing error.

A range price strategy actually benefits both buyers and sellers. Buyers see homes they wouldn’t otherwise know about, had the fixed price fallen slightly outside their search parameters. A home buyer’s greatest fear is missing the perfect house. Buyers want more homes to choose from, not fewer.

Sellers benefit from the extra exposure. More buyers finding their home results in more showings and potentially more offers.

The marketplace in general benefits because sale prices reflect a home’s true value more accurately. Supply and demand is a major factor in home sale prices. Value Range Pricing brings home buyers and sellers together and results in a less emotional negotiation.

The Rest of the Story

My real estate career began in Denver in 1984. It was very much a seller’s market at the time. From my first day on the job, I was taught that the only way to sell a listing was to price it lower than the last home sale in that neighborhood. That practice persisted for years, while home prices continued, not surprisingly, to fall.

Range pricing would have made a difference in that marketplace. At least, it made a difference in the San Diego market of the mid-90’s when the concept was introduced. Overnight, buyers had to decide how much to offer for a home based on factors other than the price the seller was asking.

How much would you pay for a product if you didn’t know how much it cost? That’s one of the keys to the value range. A buyer can make an offer that reflects their opinion of value. And the process begins.

Sara Driscoll is a Broker Associate at Pacific Sotheby's International Realty, serving San Diego home buyers and sellers since 1988. Realtor, DRE# 00988097

Leave a Comment