Did you hear a real estate talking about VR pricing and wonder what they were talking about?
When you look at the home listings – whether you are a buyer or a seller – you may come across a pricing structure you have never seen before.
It is called value range pricing, or VR pricing for short.
Instead of listing a property at a fixed price, you may discover that a seller is listing their property using value range pricing – indicating that offers will be entertained between a low and a high number. This may seem strange, but some real estate agents swear by it.
The term value range pricing can also be called other things, including “range pricing,” “variable pricing,” “vrp real estate,” and “value range marketing.”
Over the years, numerous clients have asked me, “what is value range pricing”?
Whether you use it is up to you, but it is one alternative approach to home sales that may be nothing more than a gimmick.
Frankly, I am not a fan of this pricing tactic because of the deception it creates with buyers.
I will, however, give you both sides as to why or why you wouldn’t want to use this real estate pricing strategy. There are certainly pros and cons to using vr pricing. The cons far outweigh the pros.
You can be the judge by taking a look at the re-cap below of what value range pricing does for both buyers and sellers.
Marketing With Value Range Pricing
Most people consider this marketing method to have originated in Australia. Having a pricing range made its way over to the U.S. in 1995 on the West Coast, then to New York the following year.
While it never took off nationwide, value range pricing has continued in some local regions, especially California.
Some real estate agents consider it a powerful selling tool, while others think it’s underhanded. Depending on your situation, though, it could prove helpful in selling your home.
Say your home is worth $400,000. If you wanted to use value range pricing, you could list the home as $375,000 to $425,000. Each situation would be slightly different, but many value range-priced homes look like this.
When listing your home in this fashion, you are telling buyers that you would be willing to sell your home for somewhere in this range.
The most significant advantage to this approach is that it can bring buyers and sellers together that would otherwise never meet.
Is Providing a Pricing Range a Good Idea?
Consider if you had listed the home at $410,000. This means that all the online shoppers only willing to spend $400,000 would never see your home in their search results. This could be true even if you would be willing to accept a lower price.
The value range pricing approach gives you more room to negotiate and more opportunities for potential buyers to see and consider the home. Using this method requires a long, hard look at what you will accept for your property.
Critics that insist this is a bait-and-switch approach assume that sellers will list a home in a range where they would never consider the lowest price.
If this is the case, it is a bit disingenuous. However, for most sellers, several considerations go into how much they will sell a home for.
If all the proper criteria are met, there is the lowest price you could part with the property that might be perfect for a potential buyer.
Now let’s consider the downsides, which can be considerable with vr pricing.
Using Value Range Pricing Can Be Deceptive
You can imagine how frustrating it would be for a buyer to see a home listed for a price only to discover that the seller is unwilling to accept that price.
This is why if you use value range pricing, you must take the time to think it through.
What becomes very discouraging for buyers is when the price displayed from a search on the multiple listing service is at the low end of the range and is not a price the seller would be willing to accept.
For example, a home using vr pricing is listed from $500,000 to $550,000, where the seller is looking for something over $525,000.
The price displayed to a buyer online, however, is $500,000. A buyer would assume they are looking at a $500,000 home without reading the fine print.
It is not good when the buyer finds out this is not true! If value range pricing is not typical in your area, some buyers and agents will have one word come to mind – deception!
Many MLS Boards Don’t Showcase Value Range Pricing
Many multiple listing services, including the one here in Massachusetts, do not allow a method by which a buyer knows there is value range pricing.
A buyer only knows by reading the comment field, which buyers often skim.
Imagine calling your real estate agent to schedule some showings. You head out the door thinking you are looking at homes priced around $500,000 when looking at a home priced between $500,000 to $550,000.
So if the seller expects to sell their home near $550,000 and you only qualify to spend $500,000, guess what happened?
If you guessed everyone’s time was wasted, you are 100% correct. The agent, buyer, and seller all wasted time by having a showing to a buyer that wouldn’t be able to purchase the home.
This is a pricing tactic that I have seen some real estate agents use in the Franklin, Massachusetts, area. It is not that influential or more people would be doing it. Franklin is one of many towns I work in.
Rarely do you vr pricing in other communities.
Price Your Home Correctly
With value range pricing, starting at a range of about 5 percent above and below your home’s estimated value is generally recommended.
Just because you are marketing a home using a particular pricing technique doesn’t mean that it allows you to overprice your home.
If you overprice a house, regardless if you use value range pricing or not, it will not sell! The risks of overpricing a home are numerous.
Over the years, I have seen many homes with value range pricing where the actual value did not even fall into the range. The Realtor or seller priced the home too high.
VR Pricing Doesn’t Make Buyers Overpay For Homes
A gimmick like value range pricing does not cause people to overpay for homes. If that is what you are thinking, don’t even consider using value range pricing as a marketing tool.
Discuss with your Realtor whether the approach would suit your property, and work with your Realtor to determine the criteria for your house pricing.
What would make it worth selling at the bottom of your range? What would keep you from doing so?
Establish fair rules when the offers start coming in. You are never obligated to accept a price you do not think is appropriate. Just determine ahead of time what fair means.
There are several ways seller get their price wrong. Don’t let value range marketing be one of them!
My Thoughts on Value Range Pricing
In the long run, you are better off pricing your home in a range close to the actual value and forgetting about value range pricing!
This would be especially true in a strong market where stepping outside the norm is unnecessary.
Pricing a home is an art and a skill. It is one of the most challenging jobs a real estate agent has when representing a seller.
If you get the price wrong on a home, everything else you do won’t mean a hill of beans. All the marketing in the world won’t sell an overpriced home!
One of the unfortunate parts of the real estate business is lots of Realtors don’t have any pricing skills.
Do you know how many homes see their prices drop daily across the country? A ton!
While this happens sometimes because the overall market is dropping in value, most of the time, it’s because the home was priced WRONG!
VR Pricing Works Great For Agents Who Don’t Price Accurately
The value range pricing strategy is perfect for the real estate agent who doesn’t know about setting the right price for a home.
Value range pricing could be re-named “I don’t know what the hell I am doing pricing.”
Everyone knows the Realtor in town who consistently overprices their listings. You know the one – nine out of every ten listings has a price reduction. Some agents lack pricing skills, and others intentionally take overpriced listings.
This type of agent now has the perfect fallback plan. Not sure about using the correct real estate comps? Hey, let’s just value range price it. Now we don’t need to be accurate – brilliant!
Folks, forget about pricing gimmicks if you want to sell your home for the most money. Price your house at or near the market value, and you will see the desired results.
History shows us repeatedly that a home priced correctly on day one will fetch more money than homes that aren’t. Price reductions and extended days on the market are your enemies.
If you started with value range pricing and realize it was a mistake getting your home to the right price is critical.
Specific criteria tell us when to drop the price of a home.
With an Accurate Comparative Market Analysis, You Don’t Need Gimmicks
When you want to sell your home for the most money, you need an accurate comparative market analysis, not pricing gimmicks.
One of the best attributes of top-producing Realtors is to price a home accurately from day one. They don’t tell sellers what they want to hear. There is also no fear of losing a listing because they have plenty of business elsewhere.
Overpricing happens when you listen to real estate agents that NEED business. Their strategy is to get you to sign the exclusive right-to-sell listing contract and then beat you over the head, asking for price reductions.
It is a significant home seller mistake in real estate sales. Don’t fall for this con job. Always look at comparable sales through the eyes of a buyer.
Take the emotions out of selling your home. Pricing is always more straightforward when you make your home sale a business decision.
Final Thoughts on VR Pricing
Over my thirty-seven years as a real estate agent, plenty of gimmicks have come and gone. There will undoubtedly be plenty more.
If you are in the Metrowest, Massachusetts area, skip the range pricing nonsense and work with an excellent agent. Feel free to reach out if you will be selling your home and want accurate pricing.
Other Helpful Resources on Pricing a Home
- What happens when you overprice your home – see several of the significant downsides when you don’t price your home correctly at Maximum Real Estate Exposure.
Use the above resources to understand why pricing your home correctly is essential for getting top dollar. Those who price as they should be sitting at a closing table with a smile and far less stress than those who don’t!
About the Author: Bill Gassett, a nationally recognized leader in his field, provided the above information on value range pricing. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of Metrowest towns for the last 37+ Years.
Are you thinking of selling your home? I am passionate about Real Estate and love sharing my marketing expertise!
I service Real Estate sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
