What is Value Range Pricing?

In real estate there are two truths. Every home has a buyer and every buyer has a price. Regardless of all the other factors involved in buying and selling real estate, price is the ultimate equalizer.

Enter value range pricing. Value range pricing or variable pricing as it's sometimes called was introduced originally in Australia where homes are sold both by US traditional ways but also by non-distressed auctions. More on the auctions later...

It was then picked up right here in San Diego and has been used quite commonly in California as well as many other but not all states in the US. 

A value range pricing is just that...setting a range between two prices that you (seller) and your realtor believe the home will ultimately sell at.

No matter what type of home you are selling, value range pricing can be a wonderful tool to find you the right buyer.

Selling with Value Range Pricing

Let's say you have a home that has an estimated value of $1,000,000. If you are wanting to go with a value range pricing, you might want to do $975,000 - $1,025,000. This does two things. It drops the lower end below the $1mil mark and it allows for room to bid up to the estimated value or possibly more.

Many buyers will put a cap on their search value. If a buyer has capped their search at $1mil and instead of using a value range, you decide to list slightly higher ($1.25mil) to "allow room for negotiations", then you would have missed marketing to that buyer. 

In addition, if you listed the home too high at $1.25mil and it's sitting, now you have increased your days on market before you can adjust the price to below that $1mil mark. More time on the market typically means less money in your pocket.

The biggest value you get from value range pricing is a multiple offer situation. We covered the topic of multiple offers in many blogs. It is the absolute best position a seller can be in. Muliple offers allow the seller to have all the leverage and the buyers none, as they will be blindly bidding against each other to win the home.

Buying with Value Range Pricing

One of the common gripes about value range pricing is that it is a form of bait and switch. It can mislead a buyer into thinking the home will sell for less. Since no one can really know what the price of a home will be, this is a tough argument. And if you have been active in the current 2021 real estate market, you understand any listing price has proven to be somewhat arbitrary.

As with any and all real estate you are considering purchasing, having your real estate professional do a proper analysis of the home will give you the right insight as to how much you should offer on the home. Just know that as stated above, value range pricing is often used to get multiple offers and drive the price up.

Can you offer less or more than the range? Yes. You can offer any price you want on any real estate for sale. However, if you are going to be offering less than the value range, make sure to include comps that support your value. This will help the seller not disregard your offer as a low ball.

If you are considering to buy, sell, or invest here in San Diego, please reach out to us! We would love to be your real estate resource!