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Variable or Value Range Pricing for Homes

The use of variable range pricing versus fixed home pricing is a controversial issue in real estate. In some markets such as that in San Diego, it is a successful practice that has worked well in both seller's and buyer's markets. In other areas, the concept has not been well accepted.

 

How does variable or value range pricing work?


Real estate valuation is subjective and  time-sensitive. A seller who wants to move quickly may price the home aggressively to attract the largest number of buyers. A leisurely seller, on the other hand, may wish to hold out for a higher price in spite of lengthier market time.  Most sellers would like to have the best of both worlds and that is where variable range marketing works so well.


For example, let's say that a given home might sell for $429,000 at the bottom end of the range and $459,000 at the top end. Value or variable range pricing might range from $429,000 to $459,000. The added benefit of this pricing is that buyers looking on the internet for a home priced under $450,000 would now discover this home because the bottom end of its pricing range is less than $450,000. Of course, we always make sure our sellers would actually consider an offer at the lower end of the range before advertising it! To do otherwise would constitute misleading "bait and switch" advertising.


When working with out-of-area buyers who do no understand the concept, we suggest that they consider the pricing in context of market time and seller's circumstances. If the home has been on the market beyond a certain period of time, an offer in the lower range might be appropriate. On the other hand, if the home is well-priced and has much buyer interest, an offer toward the upper end of the range might be required.


Variable price ranges were very useful during hot seller's markets--especially when testing the upper range of pricing. The practice became useful once again in softening the price landing for these same sellers. It is a useful pricing tool for all markets, once buyers and sellers understand the concept.


Bear in mind that in many areas buyers are very put off by the variable pricing concept, considering it akin to the old "bait and switch" pricing plans. Be sure to be sensitive to your area's concerns before instituting any new or controversial pricing plans.

By Diane Tuman



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