Sellers put their homes on the 'range'
By Adam Shell, USA TODAY
Tue Nov 29, 6:42 AM ET
With houses sitting on the market longer, some agents are hoping to boost traffic, generate more bids and close more deals by listing homes in a price "range" rather than a fixed asking price.
Homes valued at $500,000, for example, are being listed by agents in a price range of, say, $475,000 to $525,000.
Supporters of this strategy, referred to as value range marketing, say it exposes a property to more buyers by bringing together buyers and sellers who might not have crossed paths had the listing been at a higher fixed price.
"It's like fishing with a net compared with a single hook," says Carlton Lund, a Carlsbad, Calif., agent who has used range pricing since 1995. A home listed for $339,000 won't turn up in a search by someone who only wants to spend $310,000, Lund says. "But if you price it in a range of $299,000 to $339,000, it will show up in their search," he says.
The concept originated in Australia and has been used by some U.S. agents since the mid-'90s. In San Diego County 57% of all closed sales this year used range pricing, up from 10% in 2000. The biggest proponent of range pricing is Prudential Real Estate, which rolled out the strategy nationally in the mid-1990s.
Jerry Provansal of Carlsbad, Calif., recently sold a house for $6,000 above the listing range of $725,000 to $775,000 after receiving multiple bids. "We thought everybody would low-ball us, but that didn't happen," he says. "The range enhanced the bidding process."
The strategy has failed to achieve mass adoption in the USA due to confusion about how it works and agents' resistance to change, says John Maxfield, president of Prudential Maxfield.
It's generating interest now because it works well in slow markets. Ken Truscott of Prudential Truscott Realtors in Duluth, Minn., rolled out the strategy in September amid a 44% rise in listings. He has 25 range listings, which require a seller to consider - but not accept - any bid in the range. "The market's soft. There's no reason for buyers to get active," he says, adding that an initial bid "is an incentive to start negotiations."
Recently, a home that sat on the market nearly 50 days at a fixed $139,000 listing price got an offer within a week after it switched to a range of $109,900 to $129,876. After an initial low-ball bid of $109,900 and two counteroffers, it sold for $125,000, Truscott says.
Backers say houses sell faster and for more using a range. But a paper published this summer in The Journal of Real Estate Finance and Economics found that homes take longer to sell using a range and that it does not have a significant impact on final prices. "It's a marketing gimmick," says co-author Marcus Allen, a professor at Florida Atlantic University.
But San Diego entrepreneur Steve Cade has sold five homes in 10 years using a range and says it gets buyers and sellers talking. "When people talk, many times they can get a deal done."
tinyurl.com |
