does Range Pricing work

In case you are not familiar with it, range pricing is when a house is offered for sale within a set price range, say, $240,000 to $275,000.
And a range priced listing is usually accompanied by language that explains the terms of the range; ‘SELLER WILL ACCEPT OR COUNTER OFFERS BETWEEN $240,000 AND $275,000’. So, in other words, making it clear that the seller WILL NOT accept or counter offers that are NOT within the range.

So the goal of range pricing is for the seller to control the price at which offers come in and, ultimately, the price at which the home sells for. And, as a secondary benefit, to avoid those pesky low-ball offers.

If that’s the case, then range pricing is failing miserably. I’ve looked at range pricing a few times in the last couple of years, and posted the results here, and each time range pricing did not live up to expectations. Not nearly. And this time is no different.

15 Range Priced homes, priced from $235,900 to $1,495,000, have sold since Jan 1. But just 4 of them sold within the price range, with 2 of them selling at the very bottom of the range. The remainder all sold below, and many well below, the bottom of the range. And these results are completely in line with those from previous years.

Nevertheless, range pricing continues to be in fashion. Currently there are 28 range priced homes for sale in the foothills, from $247,000 to $3,284,000.

For range pricing to have any chance of working in the current market, the bottom of the range needs to be at a price that buyers will literally jump at. But that’s not happening. Range priced homes are, just like non-range priced homes, overpriced. And guess what, range pricing is not some kind of silver bullet that’ll somehow overcome overpricing.

But I think range pricing can work to a sellers advantage in a HOT market. By openly setting a price range for bidding, in a HOT market, I can see how range pricing could easily encourage multiple offers. But in slow buyers market, with lots to choose from and most of it going nowhere fast, I don’t think so. I think, on the contrary, it discourages offers. Setting a range reinforces that not only is the home overpriced, but that the seller is even more unreasonable in that they’re trying to hold buyers to this ridiculous price range.

But buyers have learned to ignore the range and offer what they want. And sellers, smartly, are playing along. In other words, the market is working, if slowly.

thefoothillsToday.com
to find your Tucson Foothills home

Comments

[PK Steffen]

Range pricing only makes sense to the agents who come up with them and the sellers they can't convince to sell at the low end of that range without such a silly system in place. Ask yourself, does range pricing work anywhere else?

A cash offer and quick close is the only thing that opens up a immediate range in price that a seller may accept. Time and patience on the buyers part as we have seen all too often can also have a similar effect on price.

[Bobby]

Yes, Stuart, I am already well aware of your opinion from your first posting on the topic. And I agree with you. But as I stated, I posted the link to the article from Psychology Today because I thought others might be interested in reading about the behavioral economic studies relating to the practice.

[Stuart]

Bobby, I won't try defending the psychology behind range pricing...if the sellers and their agents want to "play that game" even if most buyers won't join in the fun and look at it and yawn...so be it.

Most of us typically ignore that approach and if we like the home make a bid that we feel is quite realistic. The seller has the choice of either accepting it,countering or just rejct it. Range price or not..it will not affect the final outcome.

[Bobby]

I am not defending the practice of range pricing, but here is a link to an article from "Psychology Today" magazine that look at it from a behavioral economics perspective:
http://www.psychologytoday.com/blog/priceless/201002/home-wont-sell-try-two-prices-instead-one

[JD]

It's stupid. If you tell me you're willing to sell your house for somewhere between $1,300,000 and $1,600,000, why would I ever make an offer higher than $1,300,000 (at the most?)

[Rolf]

Buyer's perspective: Range pricing is insulting to sophisticated/experienced buyers.
It actually reflects more negatively on the listing agent than the seller who goes along with that moronic scheme. Range pricing declares the buyer won't accept any offers above the range (go figure), and won't even look at anything slightly below the range. The latter is the last thing a seller wants to convey in this market.

[RD Harris]

I look at those and think silly, silly people.

Sure as heck would never make an offer inside that range, since if they say anything inside is acceptable ... lets try something below that range to see if they are serious about selling.

If they ignore your offer, they aren't serious about selling.

Plus I really hate all the these items doesn't convey with home listings, basically if you don't want something included with the house replace it before pictures are taken.

[Stuart]

Most buyers in today's market ignore a home's listed price range and assume that a bid even below the bottom of the specified range could be acceptable to the seller.

Maybe the agent recommends this to a client who is reluctant to list it at the low side of the range...figuring that to get the listing he must go along with the seller's unrealistic expectations and have a higher number in the listing.

A rose is a rose...and the best bid will be whatever a buyer is willing to pay. The listing price, be it a single number, or a range, will have little effect on that decision.