Pricing is an art, not a science, Part II
If the key to optimum exposure for a property is pricing it correctly, then choosing the right range is an essential element of the process. With a fixed price, a seller can make only two mistakes: asking too much or too little. Both are costly.
Pricing within a range is easier for several reasons. First, remember that value is in the eye of the beholder. An exceptional view or an extensive remodel are two variables which can add a great deal of value to a property, but how much, exactly? The seller and the buyer will undoubtedly have vastly differing opinions. On the other end of the spectrum, how much discount should be considered for a location backing to a freeway or the existence of deferred maintenance? A wide range will include the property's true value, even if the seller doesn't know quite what it is!
Key #1: Select a Wide Range.
A wide range means more buyers will find it in their searches. Pushing the boundaries in both directions allows both parties to dream a little before accepting the reality of "market value". Agreements are more difficult to achieve in a transitioning market because buyers and sellers both overestimate their position and negotiating power.
Home prices have declined in recent times more than most sellers are willing to admit, yet less than most buyers are willing to admit. The wide range allows both sides to come to the table with their opinions of value intact, and agreement is much easier to reach with both parties at the table! Good range guidelines are 10% in either direction. Example: $575,000- $635,000.
Key #2: Position the Target Price in the Upper Half of the Range.
One of the keys in selecting the range is not to be predictable or obvious with the sales price goal. Often, a buyer who is sincere about a property will pay more than the seller would have selected as a fixed price, yet never realize it. In a competitive marketplace, sellers using a fixed asking price are forced to price their homes below the competition if they need to sell, even though the property may offer more value than the other available homes. If they choose a price higher than the competition--even if the value is supportable, buyers may never see it or consider it.
The high end of the range should allow for fair compensation for the amenities, and the low end should reflect the value of homes on the lower end of the scale. Often, a range will encompass the pricing throughout the neighborhood, and the free enterprise system will result in a sale price that honors both parties.
Key # 3. Stay the Course.
With any concept that is slightly unfamiliar, the natural tendency is to give up if success is not immediate. A home sale today is a process that has a beginning, and middle and an end. A proper pricing strategy should result in showing activity, some "second looks", and then written offers. If any of the three do not occur, a change may be in order, and a range is twice as easy to correct than a fixed price. The top number can be tweaked, as can the bottom number, or both! Stick with the concept and fine-tune, and you will achieve the success you deserve.