…Whether ‘Tis Nobler to Range Price

To range price or not to range price, that is the question.

Earlier this week, Kris Berg of the San Diego Home Blog posted her findings with range pricing (Hi Kris, I’m Kelley).  She says she uses range pricing more often than not, but it is still a debated topic around the Tucson real estate water cooler. 

The idea behind range pricing is to set a low and a high value, a range in which the Seller is willing to respond to offers, where the low end is lower than perceived market value, and the high end is, well, higher than that.  The range price can also expose the home to more potential buyers.  If you search Kris’s blog for “range price,” there’s a plethora of information there that I don’t want to rehash here.

The issue is this: in our MLS system, the low end of the price range is the displayed number.  Our MLS rules state that the first line of the property description must indicate the house is range priced and state the range, but this isn’t highly enforced.  A buyer searching the MLS for properties sees the low number, and expects to negotiate down from there.  Of course, the seller wants the high end of the range, so you’re starting with completely different expectations from the buyer and seller.

However, I can see the other side of this story, that range pricing, properly applied, could be an appropriate pricing strategy.

Let’s look at numbers, shall we?

In the greater Tucson area, over the past 6 months, single family homes only:

  • 434 listings sold were range priced, out of 5231 sales total
  • 47% of those sold for more than the bottom of the range
  • 38% sold below the bottom of the range
  • 15% sold at the bottom of the range
  • Average range size was nearly $15,000
  • Homes selling above the low end of the range went for 3% more than the low end on average

Let’s look at a smaller area, so that we can make more appropriate comparisons between range pricing and traditional pricing.  The Northwest had the most range priced homes over the past 6 months, and has a large and varied inventory. 

 We see that the number of ranged price homes is a fairly small portion of the overall market, but is certainly a growing number.  I really wished we’d find that ranged priced homes were a representative sampling of the listings, but I see that ranged priced homes are $700k and less, and the traditional homes are listed up to $5 million.

Let’s look at the under $700k group:

Well, we see that range pricing gets a seller more per square foot on average.  With an average home Northwest under $700k being 1853 sq ft, that’s an extra $3224.

I’m still on the fence with range pricing.  I still feel that it sets up false expectations between buyer and seller - but that could change if range pricing becomes more commonplace in the Tucson market.  Regardless of the range, my buyers and I are going to write an offer based on what we feel is market value when we look at comparable solds, but maybe having a range price would get more people into my seller’s houses, and net more offers, more opportunities to negotiate.

Something to think about.

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