Some Thoughts on Pricing Real Estate

March 9th, 2009 categories: Central Connecticut News & Information, Home Sellers, Real Estate Market

Value Range Pricing

Robin Stansbury had an article in the Hartford Courant this weekend about a practice in real estate listing called “value range pricing.”

For example, a seller lists their home at $599,999 but the listing agent makes a note in the MLS that the seller will “consider offers between $525,000 and $599,999.” The idea behind this pricing strategy is to get more buyers into the home and more buyers writing offers, simply because they think they the seller is more flexible on price. The seller doesn’t necessarily accept a much lower offer but at least the door is opened for buyer and seller to begin a negotiation.

Does value range pricing work? I don’t know. It’s a technique that’s been used in other markets but not one I’ve seen that often in the Central Connecticut area. It’s gimmicky but no more so than any other pricing strategy (using odd prices like $345,678). But in this market, sellers need to differentiate themselves.

Pricing to Sit

There’s pricing to sell and then there’s pricing to sit. Buyers need to be wary that not all sellers are motivated to sell.

Case in point…last year, I showed a bank-owned property east of the river. Priced at $299,000 in 2008, the house was sitting on the market for over a year. The rational decision would be to lower the price, right? Not if you’re a bank. You hire another agent to re-list the home at $100,000 more than the price it sat at for more than one year. What, values increased in the last year?

Or how about a listing where the trustee of the estate is living rent-free in the house while it’s on the market? The trustee is not in a rush to sell so they are willing to wait for a full-price offer, even though recent comparables are selling for $10,000 less than the list price. They’ve got a long wait on their hands.