Pricing Range

[NeetaT]

I apologize if this is a dumb question, but when did it become in vogue to apply a price range on a listing? I have witnessed this phenomenon in recent years and only in some areas. Please explain the logic behind it.

[SD Realtor]

It was initiated by Prudential. Basically it is a tool to try to get people into your home who actually would not be able to afford the home but the thought is that you get them in, they fall in love with it, and then they stretch to buy it.

Quick story… There is a listing in RB right now in a price range. It is a 60k price range, on the low end it is mid/highish 600’s and the high end is close to mid 700’s. So my client who is a cash buyer came in with a lowball offer. They countered at the high end. My client REALLY wanted the home so he came back right in the middle of the price range. They countered 5k less then their high end. This only served to my client off and he walked. I had a long discussion with the agent, who yes is a Prudential agent. I asked her why they listed a price range is there was no intention to take it. Her answer was, well you know how it is, this is how Prudential prices homes. I informed her that I am currently in escrow with two other homes and Prudential is on the other end. In both those cases we were at or under the price range, so please don’t try to rationalize that sort of behavior. Furthermore this particular listing has been riding the market down for the past 2 years as it has been listed a few times.

The bottom line is that the seller is simply not that motivated. The seller does have alot of equity in the home and the sellers behavior is being backed reenforced by this agents poor behavior.

I am not endorsing or not endorsing value range pricing. My advice would be if you are a seller and are going to offer the range pricing, don’t act like a ***hole if you get a lowball offer or an offer at the low end of your range. I have another listing in Vista and the sellers initially had me price it at a certain range based ont he data I gave them. We got 2 immediate offers right at the low end and they couldn’t negotiate a deal. I asked them why they had me price it their if they were not willing to negotiate at that offer and they told me that they had a friend who told them to work in that manner. I told them to reprice to something that they would accept so that they would not everyone off and they did.

(Note, Rus and others, this post is not intended to be a manipulative or shill post…trying not to add slants, just posting the facts… if you guys want I will delete it.)

SD Realtor

[SD Realtor]

It was initiated by Prudential. Basically it is a tool to try to get people into your home who actually would not be able to afford the home but the thought is that you get them in, they fall in love with it, and then they stretch to buy it.

Quick story… There is a listing in RB right now in a price range. It is a 60k price range, on the low end it is mid/highish 600’s and the high end is close to mid 700’s. So my client who is a cash buyer came in with a lowball offer. They countered at the high end. My client REALLY wanted the home so he came back right in the middle of the price range. They countered 5k less then their high end. This only served to my client off and he walked. I had a long discussion with the agent, who yes is a Prudential agent. I asked her why they listed a price range is there was no intention to take it. Her answer was, well you know how it is, this is how Prudential prices homes. I informed her that I am currently in escrow with two other homes and Prudential is on the other end. In both those cases we were at or under the price range, so please don’t try to rationalize that sort of behavior. Furthermore this particular listing has been riding the market down for the past 2 years as it has been listed a few times.

The bottom line is that the seller is simply not that motivated. The seller does have alot of equity in the home and the sellers behavior is being backed reenforced by this agents poor behavior.

I am not endorsing or not endorsing value range pricing. My advice would be if you are a seller and are going to offer the range pricing, don’t act like a ***hole if you get a lowball offer or an offer at the low end of your range. I have another listing in Vista and the sellers initially had me price it at a certain range based ont he data I gave them. We got 2 immediate offers right at the low end and they couldn’t negotiate a deal. I asked them why they had me price it their if they were not willing to negotiate at that offer and they told me that they had a friend who told them to work in that manner. I told them to reprice to something that they would accept so that they would not everyone off and they did.

(Note, Rus and others, this post is not intended to be a manipulative or shill post…trying not to add slants, just posting the facts… if you guys want I will delete it.)

SD Realtor

[NotCranky]

I can add a few comments but someone else will have to pitch in with the actual history. In San diego it seems that Prudential was the first and has been the most active in using this technique. It is probably designed to get more people to look at the property. I think it gets the agents more listings because they can make the seller very happy with a high looking price too. In theory it is supposed to cover a variety of terms like wether or not closing costs are contributed by the buyer, how many repairs are requested ect. It really is unfair to buyers the way it is used in my opinion. There have been lawsuits over it I believe. The ranges are so broad in some cases, that they could cover the a complete renovation and all other normal costs .Once I offered 5k cash over the low end of the “value range”, “as is” terms,no buyer’s closing costs from the seller and the offer was rejected. That, to me,is a clear proof of bait and switch intent.

[NotCranky]

I can add a few comments but someone else will have to pitch in with the actual history. In San diego it seems that Prudential was the first and has been the most active in using this technique. It is probably designed to get more people to look at the property. I think it gets the agents more listings because they can make the seller very happy with a high looking price too. In theory it is supposed to cover a variety of terms like wether or not closing costs are contributed by the buyer, how many repairs are requested ect. It really is unfair to buyers the way it is used in my opinion. There have been lawsuits over it I believe. The ranges are so broad in some cases, that they could cover the a complete renovation and all other normal costs .Once I offered 5k cash over the low end of the “value range”, “as is” terms,no buyer’s closing costs from the seller and the offer was rejected. That, to me,is a clear proof of bait and switch intent.

[NeetaT]

So that narrows it down. When I move out to San Diego two years from now, I will look only at the listings that show one price and assume OBO.

[NeetaT]

So that narrows it down. When I move out to San Diego two years from now, I will look only at the listings that show one price and assume OBO.

[noone]

SDR and Rustico answered the question. I just wanted to add that the Internet probably had a hand in popularizing this method.

An exaggerated example (or is it?) would be that if you price your home at $600k and I’m searching realtor.com or ziprealty.com for homes priced under $300k, your home won’t show up in the result set. But if you price it in a range between $299k and $600k, it will show up.

A naive buyer would think, “Oh look! I’ll probably have to offer them something a little over my price range, but we can probably strike a deal at around $350k. It’s a little above my ideal price range, bit I can manage it.”

[noone]

SDR and Rustico answered the question. I just wanted to add that the Internet probably had a hand in popularizing this method.

An exaggerated example (or is it?) would be that if you price your home at $600k and I’m searching realtor.com or ziprealty.com for homes priced under $300k, your home won’t show up in the result set. But if you price it in a range between $299k and $600k, it will show up.

A naive buyer would think, “Oh look! I’ll probably have to offer them something a little over my price range, but we can probably strike a deal at around $350k. It’s a little above my ideal price range, bit I can manage it.”

[SD Realtor]

Neeta –

I would not limit your selections just because someone has a price range. Agents work for and represent sellers. The case I told you about was a single case and I don’t believe is representative of the norm. If things go according to the plan advocated/hoped for by most of this board including myself, two years from now should be a pretty darn good time for buyers. You should be able to drive a good deal depending on location and housing type.

SD Realtor

[SD Realtor]

Neeta –

I would not limit your selections just because someone has a price range. Agents work for and represent sellers. The case I told you about was a single case and I don’t believe is representative of the norm. If things go according to the plan advocated/hoped for by most of this board including myself, two years from now should be a pretty darn good time for buyers. You should be able to drive a good deal depending on location and housing type.

SD Realtor

[BuyerWillEPB]

It bothers me too when I see a house where the listing has a price range.

I think I will submit an offer price range in response.

On the offer form I’ll just fill in that my offer will be $300K – $350K.

[BuyerWillEPB]

It bothers me too when I see a house where the listing has a price range.

I think I will submit an offer price range in response.

On the offer form I’ll just fill in that my offer will be $300K – $350K.

[SD Realtor]

BuyerWillEPB that is a great response. You got a laugh out of me…

So here is what I would term a tolerable reason for a price range.

When a person lists their home with a realtor, on the listing agreement there is a section where you list how much you will pay the cooperating broker. Now SOME brokers will work out deals with sellers that state if they end up representing both sides, the commission on the coop side will be reduced.

Lets be theoretical –

So lets say you have Remax list your home. You will pay them say 2.5% to represent you the seller, this is known as the listing side. Let’s say you will also offer a cooperating broker commission of say 3% to the agent representing the buyer… (fyi in real estate this is also known as the selling agent believe it or not)…

Okay but then you work out a deal with the Remax agent and you say okay if you Mr Remax agent brings a buyer I will only pay you 2% as a cooperating broker commission.

So in that case it can be argued that it is justified that you list the home in a price range where the low price was 1% less then the high price. This indeed makes sense. Of course nobody prices in this manner AND you would need to get that agreement in place with your listing agent.

SD Realtor

[SD Realtor]

BuyerWillEPB that is a great response. You got a laugh out of me…

So here is what I would term a tolerable reason for a price range.

When a person lists their home with a realtor, on the listing agreement there is a section where you list how much you will pay the cooperating broker. Now SOME brokers will work out deals with sellers that state if they end up representing both sides, the commission on the coop side will be reduced.

Lets be theoretical –

So lets say you have Remax list your home. You will pay them say 2.5% to represent you the seller, this is known as the listing side. Let’s say you will also offer a cooperating broker commission of say 3% to the agent representing the buyer… (fyi in real estate this is also known as the selling agent believe it or not)…

Okay but then you work out a deal with the Remax agent and you say okay if you Mr Remax agent brings a buyer I will only pay you 2% as a cooperating broker commission.

So in that case it can be argued that it is justified that you list the home in a price range where the low price was 1% less then the high price. This indeed makes sense. Of course nobody prices in this manner AND you would need to get that agreement in place with your listing agent.

SD Realtor

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