Where is the Value in Value Range Pricing?


Back in March, I took a quick look at the performance of homes which had been assigned value range pricing versus their “fixed” price counterparts. For the approximate first quarter of the year, the stats for Scripps Ranch home sales went something like this:

Pricing Strategy # Sold (1/1/07 – 3/27/07) Avg. Days on Market Avg. $/SF Avg. $
Value Range 33 67 $330 $819,392
Fixed 23 73 $323 $774,326

(All data is from Sandicor and is deemed reliable but not guaranteed. Patent pending, all rights reserved, consult your doctor before using, don’t take before bedtime, and so on).

This morning, looking back over the stats for the past month’s lucky closed escrow winners in Scripps Ranch (an admittedly small sample), the picture was much the same. Value ranges still win the popularity contest when it comes to pricing, and they tend to outperform in both the days on market and sale price categories.

Pricing Strategy # Sold (7/15/07 – 8/16/07) Avg. Days on Market Avg. $/SF Avg. $
Value Range 21 36 $334 $812,125
Fixed 15 52 $322 $731,500

 We used to say, where value range pricing is concerned, sellers see the top, buyers see the bottom and agents see the middle. What I was really interested in this morning was whether or not this tired mantra still holds true in a market of deal-seeking, emboldened, buyers, buyers who are all at once fearful of the market yet fearless when it comes to submitting an offer.

Of the 25 value range-priced sales in the past 30 days, just over 40% of these sold below the low end of the range. Three others sold at the bottom. As an agent who uses value range pricing more often than not, my only surprise was that sold-below-bottom cases were not greater in number, yet I think this is a trend that will continue until our market stabilizes. When it comes to dilusionally low offers, I have certainly been “feeling the love”. It seems that now, sellers see the middle, agents see the bottom, and buyers see the bottom as “full price”.

The market tides have shifted, this much is certain. For too many buyers, making simultaneous and outrageously low offers on multiple properties is the new pink for Spring. Let’s throw it all against the wall and see if anything sticks. One agent was so frustrated with the practice recently, that he told me in all seriousness he is considering intentionally overpricing his listings so that when the “low” offer comes in, it is actually closer to what the seller was shooting for all along. His theory was that price is of less concern to today’s buyer than the need to feel they have negotiated a smoking deal. While I am not quite prepared to jump on the overpricing bandwagon, I understood where he was coming from.

Pricing has become a sticky wicket. Leave too much room for negotiation, and you will never see an offer or, worse yet, your home will never be shown. Leave too little, and you are committing yourself to spending every evening for the next month hanging out with your agent, killing trees and writing futile counter offers.

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