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.

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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, we knew the buyer would be tricked into thinking they had beaten the seller. Today, though, this isn’t the case.

Buyers today simply will not look out of their range. In fact, they very rarely will go even $25,000 above what they think they can afford. This is why I believe that today, sellers should be firm and show their strength. Giving a range instead of a single number does not achieve this.

"The best way to price your home is to do so with confidence."

Buyers will already have a range in mind when they search for homes. It’s the job of the buyer to look within that range. It isn’t the duty of the seller to provide a range, instead. Being aware of this can actually benefit you in more ways than just giving off the appearance of being a confident seller.

If you price your home at $700,000, for example, your listing will attract buyers who are looking in multiple ranges. Buyers looking for homes between $650,000 to $725,000, buyers who are looking for homes starting at $700,000, and more will all take your listing into consideration.

Picking a price can be tricky, though. If you were to price at $710,000 instead of $700,000, for example, your listing would no longer be on the radar of people who have an upper limit of $700,000.

The best way to price your home is to do so with confidence and at a number that will put your listing on the radar of the most buyers possible.

The pricing is ultimately just a market number that will help you drive buyers into showings where they will compete with each other—not with you.

Finally, I’d also like to remind you to pick up a copy of my new book: “Real Estate Exposed.” It has some great information and you can find it easily on Amazon.

Additionally, make sure to send us any and all of your San Diego and Southern California referrals. We’d love to get them taken care of.

If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.

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