Why Is Value Range Pricing Such a Bad Idea?
Today I’ll be talking about value range pricing. Truthfully, it has no place in today’s market.
Today we’re going to talk a little about the subject of value range pricing. You may have encountered a situation where this kind of pricing was used—where, instead of simply giving a single number for the list price, the seller says the home is available from $750,000 to $850,000.
But what does this mean, why do sellers use it, and does it make sense in this market?
Well, specifically in today’s low-inventory seller’s market, I hate it. Sellers have control, so they should show it. Personally, I don’t think that value range pricing has a place in this market. In fact, most people outside of our San Diego market have never even heard of it before.
However, between 2009 and 2011 when the market was very distressed, I myself was using value range pricing quite a bit. I used this strategy because back then, you could list a house between $675,000 to $725,000 with an actual goal of only getting $650,000.
In that market, buyers had absolute control. They would go in and make any offer at all. Because of this, sellers and their agents needed to be aware that a $650,000 buyer would be looking in ranges higher than that—up to $750,000 or maybe even $800,000.
Back then, I was playing into the psychology of the buyer. When we listed a home in a range above our goal,...