Value Range Pricing…Hype or Hope?
April 1, 2008
Another late night real estate blog by Brett Boettge….
To truly understand Value Range Pricing (VRP) we first need to understand list price. What do you think list price is? I’m sure if you are an agent reading this, list price in your mind means NOTHING. What does list price mean to your sellers? Try to tell them that list price means nothing…. that’s like telling George W. there are no WMD’s in Iraq.. clearly not convinced. This is the first challenge, and the most difficult.
You list a property and an offer comes in at list price or even above…. does your client have to accept the offer? NO NO NO NO!!! DRILL THIS INTO THEIR HEAD. “I would rather see you reject 10 offers than not receive any.” Analogy is the MOST powerful way to make a point, and let’s face it, Value Range Pricing is marketing tool to open up your sellers, and attract more buyers. Ask your seller which store they would visit based on the following ad’s….”Brand X 42 inch flat panel television $799.00+” or “Brand X 42 inch flat panel television $1299.00″. This is marketing guys.. COME ON!!! This is why clients pay you thousands of dollars to MARKET a home. Seriously, do you think that your local Super Big Box Store would market items in the Sunday ads in a value range if they could? Imagine if they could….. “Brand X 42 inch flat panel television $799.00+” (once you get here, we will let you know what is the acceptable price between $799.00 and $1299.00). YOU are the store, and your listings are your products, and you CAN market this way so do it!
Another great analogy is cars….. Cars can’t be advertised in a Value Range, so what do they do to compensate…. “2006 Pontiac Grand Prix, starting at $9,999″ What they did was discount one of the 2006 Grand Prix’s to $9,999 to draw in the most possible buyers…. by the time you get there, the advertised car is conveniently sold. At that point you are already on the lot, and I can show some similar models and more than likely close you on a $16,999 Grand Prix. Now think about this…… had I advertised at $16,999 right out of the gate, would you have showed up? How is this any different than your clients home?? Get the buyers on the lot, get them sold, or get them into a similar model!
If your client still is not convinced….. What is list price? Have you ever purchased anything on Ebay, or in an auction setting? Most have, and if not this analogy still works well by printing the screens, or taking a client to Ebay. Search for a specific item, look at the items that started at $1.00, and compare that to the items listed at “Retail” or “Market Value”. They are the same products however those that started at $1.00 have 16 Bids and are in the last 20 minutes…. last ten minutes…. last 52 seconds and for no other reason than human nature, buyers bid over the “Retail” or “Market Value”. Now the item that started out at “Retail” is still sitting there.. Have you ever payed more for an item on Ebay or in a bidding war? That is the kind of activity you want for your clients, and you get it with Value Range Pricing.
Now you have done it, your client wants to list, but they wonder why every property doesn’t start at $1.00. GREAT JOB! At this point you explain to them, that you don’t just want a buyer, you want buyers that can afford the property. You don’t want them to go through the hassle of leaving their home for a showing for a buyer that can’t even afford their home. We know that if we take “Market Value” and create a value range of 10% below that, we encompass the majority of buyers that are ready, willing, and able to purchase their home.
If you master this concept, you have mastered Real Estate marketing. The MLS is still the best tool out there, and amongst the seemingly endless inventory, a well priced property stands out far better than an overpriced property with dancing bears in front of it. If you are tired of LISTING, and not SELLING, this is the way! Look at your store, examine your products, talk to your clients and the money will come. Have a terrific evening!
Brett Boettge
TL-CEO
Keller Williams Realty Madison Crossroads
608.661.7000
Nice post. Pricing is the most important aspect of selling a home.
As a buyer looking at homes in NE, I would have to say that I loathe range pricing, and see it as annoying deceptive marketing. All it does is waste my time and email inbox space with MLS listings that aren’t “really” in my price range. Most of the “range prices” are a $50K range, which seems a pretty large net to cast to try to get a bid, and a pretty big gap to close in this kind of a market.
Sometimes I think it’s just bad practice on the broker’s part to not just tell the homeowner the truth about the value of their home in today’s market. Many of the “value range” priced homes I have passed on are still sitting there 3-4 months later. That just means they aren’t priced right. Same old real estate rules as there have always been if you price it right, it will sell, RP not withstanding.
I am glad if it is working for brokers and sellers, but from a buyers’ perspective I find the current RP practice an annoying distraction.