Selling Your Home at A Value Range Price– What Is It And Does It Work

               Have you ever wondered about homes that are listed for sale at $599,000 to $650,000 or $999,000 to $1,200,000? What does it mean? And, is the Seller obligated to accept an offer at the low price? Should you list at a set price or at a value range price if you’re going to sell your home?  We’re going to try to give you an answer to those questions, and ask for your opinion on the concept of range pricing. 

            It’s been reported that the value range pricing concept originated in Australia, and then was first used in California in 1995, right here in Carlsbad. The idea is to offer property at a price range that will entice buyers to look at a particular property, and will encourage the parties to start negotiating toward the goal of reaching a mutually agreeable price. Let’s say that you’re a seller, and you’d like to sell your property for $1,000,000. You might list your property with an agent for sale at $1,050,000 to give yourself some negotiating room or, if you agreed with the concept of value range pricing, you might list the property at a price of $$975,000 to $1,075,000. Because of the way people today are searching for properties on the Internet this would mean that the people searching for homes between $900,000 and $1,000,000 would find your listings, as would those people search for homes above $1,000,000. 

            The typical value range priced listing provides that the seller “will entertain offers within the range,” but is not obligated to accept an offer in the range. The seller agrees to counter offers made in the range. What we have found, today, is most offers begin at less than the low list price of the range, but, at least, negotiations get started. What we have found is that value range pricing is advantageous to sellers even in the kind of market we have today. 

            We did a study of value range pricing using one zip code in Carlsbad, CA, where we’ve been working for the past 6 years. We used 92009, which is south of Palomar Airport Road, and East of El Camino Real, for sales that took place between January 1, 2007 and June 30, 2007.  The information came from the San Diego Multiple Listing Service (Sandicor), which we believe is reliable, but not guaranteed (that’s agent speak for “don’t hold me responsible if the information is not correct!”) Sandicor reports the sales of homes that have been on the market through real estate agent members. 

            In that part of Carlsbad, during the six month time period there were a total of 377 homes that were “closed.” That means that contracts were completed, escrows closed, and those properties were transferred to the buyers. Of that total 224 (59%) had a fixed listing price, and 153 (41%) were listed with value range prices. 

            We wanted to figure out, if possible, which method would be best for our clients in today’s market conditions.  We wanted to see which method would sell properties more quickly, which method would result in the highest number of sales above the low list price or adjusted low list price (hereinafter both will be referred to as “list price”), which method would result in the highest average and median price above the list price. To arrive at those figures we knew we had to make an adjustment in the low list price of the value range price. 

            When setting the range in a value range priced listing the seller often indicates that they want to get somewhere in the middle of the range. So, for example, it is not unusual that if a property is listed at $1,000,000 to $1,200,000, the seller is hoping to sell for $1,100,000. We decided to use that concept in evaluating the sales made using the value range priced properties. We went one step more. We decided to set the “list price” for value range priced properties by dividing in half the difference between the reported low list price and the high list price, adding that amount to the low list price plus 5% to allow for negotiating room. We did that in order to compare it to the set list price listings that we assumed were set to allow for that 5% negotiating room by the ordinary seller. So, now we had the base of the list prices for both sets of properties: we would compare the set list price of those properties to the adjusted list price for the value range properties.

  See the following charts 

Sold for Less than List Price or Adj. List Price (1)
		NO RANGE	RANGE PRICING
% of Properties selling for less (2)		82.59%	74.51%
Days on the Market (3)
Average		71	66
Median (4)		52	46
Sale Price per Sq. Ft.
Average		$330	$318
Median		$318	$326
Dollar Amount of Discount (5)
Average		$43,701	$23,575
Median		$29,900	$33,800

            

Sold for More than List Price or Adj. List Price (1)
		NO RANGE	RANGE PRICING
% of Properties selling for more		7.59%	24.83%
Days on the Market
Average		71	30
Median		73	50
Sale Price per Sq. Ft.
Average		$330	$318
Median		$318	$326
Dollar Amount of Discount
Average		$12,646	$22,643
Median		$7,000	$9,833

 (1)   The Adj. List Price is as defined in the text.(2)  The percentages are of each category. So, 82.59% of all of the No Range priced properties sold at less than the list price etc.(3)   Days on the Market is the time between the date of the listing and the date a final agreement is reached between buyer and seller. We have not made an adjustment for properties that may have been listed and then cancelled, expired, or withdrawn in the past and then re-listed in computing this time.(4)   The median is the half way point so that 50% is more than the number listed and 50% is less than the number listed.(5)   This is the average or median dollar amount of the final sale price as reported by Sandicor, either below the list price or more than the list price.

                                        A look at the results indicates that, in today’s market, LOTS of properties are selling BELOW the list price, but, as a percentage, fewer range priced listings sell for less than those that have a set price.  And, a far greater percentage of the range priced listings sell for more than the list price compared to the set priced listings. The dollar amount over the list price is significantly greater, both as an average and as a median, for the range priced listings.

             In looking at the sales below the list price, the advantage to the value range pricing is even more pronounced. Value range pricing results in quicker sales, and the value range dollar discounts are lower than set price discounts.

             It appears that value range pricing has some merit, at least based on this market analysis. As I’ve pointed out in the past, it is always worthwhile to have your agent make a detailed study of your particular area. If you’d like me to do that for you, please call me at: 760-492-5151. 

            Feel free to pass on this article to your family, friends, and acquaintances.  If you’d like to look at what’s available in Carlsbad, or any area of San Diego, CLICK HERE FOR HOMES AVAILABLE   

          If you have any comments, suggestions, or ideas, don’t hesitate to let me know at sterling@helpusellrealty.com.