If you’re selling or buying a home, you might encounter the terms “value range pricing,” “variable pricing,” “range pricing,” or “value marketing pricing.” They are used interchangeably, and are in-fact, the same thing, but this strategy is most prevalent on the west coast, though it can be found throughout the nation. It’s more popular in areas that experience less stable home values and where market conditions change relatively rapidly.
Value range pricing is a marketing strategy that is said to be very effective by some real estate professionals, while others regard it as only marginally or not-at-all effective. This marketing tactic is used by sellers for very different reasons. Some are eager to sell and want to attract as much buyer attention as possible, while others are seeking to create a bidding war. In the former instance, it might be used to sell a home quickly for career or personal reasons, while in the latter example, it’s used to get the most out of their investment.
Regardless of motive, variable pricing can be confusing to buyers and sellers because the vast majority of property listings are set at a fixed price. This tactic allows sellers to test the market and compare their home to the competition. Most often, sellers choose a fixed asking price, then make adjustments based on buyer reaction. Because this might create the impression the asking price is too high, some sellers opt to employ value market pricing.
Value Range or Variable Pricing Explained
The concept of range pricing first began in the country of Australia and was brought to the west coast of the United States in the mid 1990’s. Although it still remains mostly localized to its market of introduction in California, it can be found on the east coast and even in the midwest, though not nearly as prominent. When a home is entered into the local multiple listing service, it’s typically set with a specific asking price.
“Whether you’re a seller struggling to find prospective buyers for your home, or a buyer frustrated by the lack of homes in your price range, value range pricing could be the answer to your real estate problems. Listings for homes sold under the value range pricing model include a range of prices rather than a firm, fixed price like most real estate listings. This wider price range may help bring buyers and sellers together more easily to spur greater negotiations.” —San Francisco Chronicle
Because it is entered with a set price, it won’t appear in buyer searches not containing its range. For instance, if a home is valued at and is worth $675,000, only buyers searching in that price range will see it in the results. It won’t be seen by buyers searching with a range of $685,000 to $700,000, even though it might be of great interest to some of those same buyers. The thinking behind variable range pricing is to provide a more far reaching audience. So, in this example, if the home is priced in a range from $675,000 to $700,000, all the buyers searching in this range will see the property. While some real estate professionals point out this marketing tactic to be a smart one, others say that it’s not effective because buyers will see homes out of their price range.
Buyer and Seller Options for Value Marketing Pricing
If you are selling your home and want to garner the most attention, you might consider this strategy. However, you’ll need to choose an experienced real estate professional to learn the true market value of your home and to determine the range that is the most comfortable. One suggestion is to look at the sale of comparable properties in the last three to six months, meaning homes that have similar square footage, number of bedrooms and bathrooms, and like amenity features. You can then vary the asking range 5 to 10 percent above market value and 5 to 10 percent below market value. Of course, you must be comfortable with receiving offers at the lowest end, but also understand you do not have to accept these.
Should you be in the market to purchase a home and encounter a property that’s being offered on a price range scale, take all factors about the home into consideration, as well as your own budget. Keep in mind that the seller might turn down an offer that’s at the bottom of the range but willing to accept a reasonable purchase offer just below, at, or slightly above comparable value. In addition, you ought to take into consideration the seller’s reason(s) for putting their home on the market. If the seller is relocating or it’s an estate home, he or she might be motivated to accept a purchase offer at the bottom of the range. Conversely, if the seller is set on getting the market value or above, he or she isn’t likely to accept anything less.