Value Range Pricing and the Priced to Sit Phenomenon in SoCal
Chuck Ponzi February 15th, 2007
This may offend some people, so if you are stupid and easily offended about your house not selling, don’t read any further because you will miss the point. Unfortunately, it’s exactly you who needs to hear this because you’re stupid.
The Issue
Value range pricing is my anathema. Why a seller would subject themselves to such a stupid lie, and what kind of a idiot selling agent would suggest one to their client is incomprehensible to me. I can only envisioin 2 scenarios where it would be used.
1. The selling agent is a certified moron
2. The seller is a certified moron
For those of you who are unfamiliar with the concept of value range pricing, it’s actually quite simple yet exceedingly confusing. Instead of telling a buyer what your asking price is, you tell them a range of prices. For example, instead of listing your house at $400,000, you list your house for $400,000 to $420,000.
Sellers
Let’s be honest. Do you know of any other thing for sale that is listed in a range? Anything? I have thought long and hard about this, and I don’t know of a single thing. So, what is different about housing? Do you prefer your buyers confused about what you’ll accept? Would you continue to shop at Vons or Pavilions if milk were value range priced, and they didn’t tell you how much it was until you went to check out? What about buying a car? Would you be willing to buy a car if the dealer told you he would sell you a car in a value range price? Would you pay anything more than the lower price?
Let’s do this (and this is something that Brad of We Help You Buy Realty has suggested), you list your house for sale in a value range of $799K to $839K, and I’ll submit an offer for your house in the value range of $0 to $799K, ok? So, explain to me how you know what I will pay for your house. Why wouldn’t I just show up to escrow and proceed to pay $1 for your house? It’s in the value range, isn’t it?
Hell, why don’t we just have a value range escrow to boot? I say that I’ll close between 30 days and 3600 days for the agreed upon price range. Would that be okey dokey for you? Why not? Why would my ambiguity be a problem if yours is not? Isn’t the saying, what’s good for the goose is good for the gander?
If you’re willing to sell your house for $799, then why don’t you list it for that? Do you really think there are that many stupid people in the world? By that, I mean as stupid as you are?
Agents
Why would you as an agent want to take on a listing like this? Are you yourself too inexperienced and not know that price does indeed matter to buyers? Or, have you only dealt with oil sheiks and software billionaires that will offer over your asking prices?
Let’s be realistic here, what price do you think I’m going to offer if you list your house in a range, the higher or the lower number? So, why do you make it difficult for yourself? Why not just give the reality to your seller and get the house sold for what they’re willing to accept?
Most importantly, the value range obscures your listing from potential homebuyers. I take a personal experience as an example. I have an agent that automatically sends me a list of properties that match a certain criteria (or at least used to). I set my upper limit at $850K for a 4 bedroom in Laguna Niguel. Pickings were often slim, and frankly still are. That much money doesn’t buy you much anymore. Then, one day as my wife and I were driving around, we happened upon a property that was quite nice, and exactly fit our criteria as far as location, size, and age. On a lark, we pulled one of the flyers outside the property. Any guess as to what the price was? You guessed it, a value price range of $825K to $875K. It never showed up on our autogenerated list. Wanting to know more, I looked it up online… several locations had it at $875K. Frustrated, I called the agent to ask why it wasn’t included in the list she sent me. She replied, “Let me check… ok, yeah… this house is too much, it’s $875K… Oh, wait,… oh, ok, yes, the house is listed in a value range from 825K to 875K. Is this a house you’d be interested in viewing?”
Needless to say, I told her that it’s not worth my time. It’s like negotiating with an employer that low-balls you an offer or trying to buy a car from someone who has listed their car for 20% over the market value based on other cars. I’ll just save myself the time and go to someone with a lower price. The other party obviously believes they are the stronger hand in the negotiations, so there’s little sense in even beginning negotiations. They are likely to be unhappy with the offer I would submit since it’s not in the “value range”.
Are you educating your sellers as to the reality of both the current sales environment, and the substantially escalating foreclosures and distressed sales? Or, are you also blissfully unaware that the power has shifted to the buyer? And, frankly, even if it hadn’t figured it out yet, do you want to tick off a buyer by providing unneeded ambiguity in a transaction that is already fraught with fear and loathing? If so, you might want to consider a different profession. Successful agents in these times will price properly and undercut available inventory. You are obviously not one of them, so why don’t you leave and let someone more experienced take the wheel. You’ll likely make more money at Burger King anyway.
Case in Point
Just one of these examples crossed my path today while perusing the OC Craigslist:
The property was value-range priced at $999,468 to $1,149,876 but listed on CL at $1,149,876. (I just happened to click on the link not expecting it to be as low as it was since I figured it was just another delusional seller). The range is a group of odd numbers, but more likely a pseudo marketing ploy to draw attention to the listing. (trust me, it’s not going to work and seems disingenuous at best.) It has a nice ocean view:
Wanting to at least see what the story was, I searched for the street it was on (the craiglist ad lists it). The house indeed was listed on OCRealestateFinder.com for $1,149,876… would not have fallen out in a search for someone who could spend $1MM. Too bad, you have just missed a sale and a fat $30K commission check. That’ll buy a lot of Top Ramen.
Then, I check ZipRealty.com. Same thing, listed at $1,149,876… just missed another opportunity to sell the property. Feeling stupid yet? You should. If a buyer could only afford $1MM, you just excluded them from seeing the property. Think your customers don’t use these tools? Ha ha. You must think that all rich people are stupid too, huh? As dimwitted as you are?
The agent’s website also seems they are equally confused about the price as any potential buyer would be… There, they have the property listed at $1,049,876. Interesting. It seems noone knows for sure how much this house should really be listed for. Or, do they?
Doing a search for the same road, I found an identical unit with nearly the idential situation with the following ocean view:
Ok, same floorplan, same view, same location… what’s different about this one? Oh yeah, the price. It’s listed for $949K. A full $50,000 less.
You haven’t got a snowflake’s chance in hell of selling your house within your range as long as this one’s on the market for $50K less. $50K will buy a lot of granite countertops and subzero freezers for your 1800sq ft palace. And, once this one sells, your recent comps are going to be reset.
The lesson? Don’t be stupid. As long as you’re delusional about your asking prices, you’ll be going without commissions. Your house is priced to sit. Hope you like flipping burgers, since you’re not going to be selling any houses anytime soon with your wishing priced-to-sit value-range price.
It has always blown my mind that people dont think this is nuts. Great write up. I remember i had this teacher in school and she was ripping on people being wishy washy, she said she showed up to a yard sale and there was a vase she liked. She asked the seller what she wanted for it. “Between $5-$8″ She whips out a five only to hear the woman say: “Well I was thinking more like $7″ the obvious retort: “Well you said five to eight, which number did you think i was going to choose!”
What an idiotic idea.
My favorite is when the spread aproaches $200K-$300K. Laughable…
Hey. Where did you get the data for this graph:
http://tinyurl.com/2ybedv
I want to make a graph like that for Marin but I need the data and I don’t want to pay for an account at foreclosure.com.
Marinite.
It’s in the post: Go to the news story and look at related links.
Here’s a link.
There’s some good data there and already in excel format.
Sorry. Thanks.
I will buy your $400 to 420k house for $200 to 80k, just to make you happy.
In any negotiation, there is a bid and an ask and a transaction somewhere between. The idea that sellers can determine both the bid and the ask at the outset is absurd. If buyers truly believed the sellers range, they will simply not make an offer. I suspect this isn’t what a seller would want.
Personally, I have never bid on a property with range pricing. If I were to do so, I would consider the lower end of the range to be the true asking price and simply ignore the top. My bid would obviously be below the range. What are they going to do, be insulted? F#ck ‘em.
In a balanced market, sellers are always selling for less than they want, and buyers are paying more than they want. That is just the nature of things. For a seller to establish a range that meets their expectations almost guarantees they will not make a sale.
Irvine Renter,
That’s exactly right.
Most buyers won’t even bother with a value range… which makes me wonder why a seller would do it?
Man, someone is now calling themselves currently john doe?
OK, time to really change it.
Anyone not like Charlie Ponzi?
What about Iznop Selrahc?
What about Chuck Ponzi?
It has always been my understanding, talking with agents about this very thing, that they “value range” the price to attract buyers on the lower end. Say you got a place you want to sell for 850k. You list at 850k and no luck. You want to expose your house to a larger market, so you “value range” it, with a lower number so that other agents who are “shopping” for their clients, who only want to see houses under 825k, will at least check the place out. They do it so that they can attract more agents who are looking for properties for their clients.
Ultimately this scam is to attract more people so that the POS they are trying to sell gets into a bidding war.
OC Appraiser,
That’s funny if that’s the desire, because that’s exactly the opposite of what it is accomplishing.
Sometimes I wonder how some of these agents are still in business. It’s perhaps only by luck, or because all you had to do was be able to breathe to be good in real estate for the past 5 years.
Personally, every time I see the phrase “Seller will entertain…(blah, blah, blah)..” I move on to the next property.
Its like they’re doing you a huge favor by allowing you to the opportunity to drool over thier unique house. And don’t even dream of offering a penny less than thier (insanely overpriced at both ends) ‘value range’.
To which I think ‘good luck with that’…..
OK, I’m feeling particularly bitter and twisted this morning - but I live in Los Angeles - have pity on me.
Its getting incredibly dull waiting for someone to drop thier prices enough to be realistic.
I kind of like Chuck Ponzi. Chuck has an abrupt finality to its pronunciation kind of like the bubble popping, and Ponzi has that long, dragged out pronunciation kind of like the upcoming bubble deflation. Together they seem to flow. Plus the esoteric historical reference is cool.
touche !
and thus Chuck Ponzi was born….
BTW, with reference to ‘value-ranging’, I don’t know of anywhere else in the country that this used. When I recently moved to CA last year, I had never seen it before.
With reference to the crazy numbers, I asked a realtor about that and in the case of a price ending in ‘876′, only Prudential uses that. It’s almost a moniker for which realtor is listing the property. Kind of neat I think.
That 876 number, there’s another company that does that to indicate internally the status of the selling item - Wal-Mart.
They give items different sale prices to indicate how long the item has been on the shelves, how it’s buying trend is going, etc.
It’s kinda funny that it’s possible to compare Prudential with Wal-Mart.
Value range has got to be the dumbest thing I have ever seen. I had been reading all the blogs about the SoCal bubble the last couple days and have noticed many of them. Who in their right mind would waste their time with such a fuzzy selling point? I see agents/seller who do this and want to tell them “Sh!t or get off the pot!”
I see people do this all the time with things. “Testing the waters”… Hell, listings cost the seller nothing but time and carrying costs. This market is so screwed up, I am endlessely fascinated about it and at the same time figuring out how to profit from it. At least the weather is nicer than Chicago!
[...] had been given to agents we talked to were lowball offers (all were more than 10% below the silly range pricing that some agents have chosen to inflict on their [...]
[...] had been given to agents we talked to were lowball offers (all were more than 10% below the silly range pricing that some agents have chosen to inflict on their listings) For as much as we’ve seen the local [...]