Value Range Pricing…What a Joke

(Riverside, California)…A few years ago, one or two of the large franchise real estate companies got the brilliant idea to try and reinvent the real estate wheel, and the result of this collective head knocking was one of the lamest marketing tools ever…Value Range Pricing. 

Value Range Pricing is the setting of a “price range” by a seller when selling, instead of setting the traditional singular ”sales price.”  For example, instead of a seller offering their property for sale at $350,000, value range pricing would have the seller offer the home for sale at a range of “$340,000-360,000″…and to keep the seller from having to accept the lower price in the range, the official wording is “the seller will entertain offers in this price range.” 

The party line for proponents of this type of price structure goes something like this:  by setting a range, they are hoping to induce a dialog between the potential buyer and seller, whereby they hope to have a meeting of the minds somewhere in the range.  In essence, by advertising the home for sale at a price lower than the seller will really accept, they hope to attract potential buyers, who once involved with the home, will pay the higher price in the range.  At the time this was introduced to the real estate community as a whole, it was touted as the next great improvement to real estate marketing.  Those of us who had been in the business for while simply shook our heads and laughed.  Let me explain why.

First of all, I’ll tell you the dialog you will start.  It will be like the one you hear from your kids. 

“You said you’d take it at this price.”

 ”No I didn’t.”

“Yes you did.”

“No I didn’t.”

Anyone with children will instantly recognize this endless loop…a loop with no end until both children are sent to their respective rooms.  Is this really the way you want to present your property to the buying public…BECAUSE WHAT BUYER IN THEIR RIGHT MIND IS EVER GOING TO OFFER YOU A PRICE IN YOUR RANGE, MUCH LESS AT THE HIGHER PRICE OF THE RANGE?

Think about it.  I’m big on grocery store examples (hey, we all shop somewhere!), so try this on.  What would you do if you walked to your meat department, and saw a price for the chicken at $2.99-3.50 per pound?  One, I think there would be a little confusion in your mind as to the actual price of the chicken…and two, when you got to the checkout counter, what price are you going to offer for this Foster Farms Beauty?  I’ll bet it’s not $3.50 per pound!

The bottom line here is that putting a ”range” on the price of a home is just plain silly.  While everyone understands that sellers always want the most for their homes and buyers generally want to pay the least…thereby making a certain amount of negotiation inevitable…the beauty of the real estate market is that there is no hidden data on the subject.  ALL SELLERS, BUYERS, REAL ESTATE AGENTS, AND APPRAISORS LOOK AT THE SAME DATA TO ARRIVE AT THE ACTUAL MARKET VALUE OF A  HOME.  It’s just that simple.  Many of us in the business view value range pricing as the marginal work of a lazy agent…an agent who did not want to take the time to properly explain all the available data to a seller to arrive at a fair price for the home…so instead, they just throw out a range that may or may not be in the ballpark, and hope for the best. 

Hope for the buyers agent to do the listing agents job…hope for buyer not to get angry when the price they expected (the low one in the range…remember the chicken) is really not available, and then hope that if this transaction ever gets into escrow, the appraisor can arrive at a definitive price since they won’t take a range.  I don’t know about you, but there is a lot of hope there, and not enough straight-forward marketing for me. 

I mean, this “pricing strategy” is so lame, that even our local MLS won’t deal with it.  Did you know that when a value range price is submitted, it will automatically be entered at the higher price?   So much for the range idea, eh?  I mean, the listing agent can explain in the remarks that the seller will consider a lower price as part of the value range pricing, but that kind of defeats the point, don’t you think?  I’ll bet the seller isn’t aware of this either.

In the end, good real estate companies and agents (Westcoe, for a biased example)  understand one thing…if the list price is fair based upon whatever forces are currently acting upon the market,  the property will sell.  If the price is not, then it won’t.  In the real estate market of 2003, that list price was probably higher than the most recent sale…and in the real estate market of 2008, that list price is probably lower than the most recent sale.  Markets come, and markets go…but no matter what the market, work with a professional that at least has the fortitude to give you a straight ahead price, and not hide behind the facade of a “price range.”  Don’t fall for a strategy long on hype and short on delivery.