When Range pricing first came to Madison Wisconsin, I shied away from it.  I did get a good background on it was too new in the market to be acceptable.  

Now it is well known but it has really not been used to it's full extent.  Now, in a slower market, I have embraced it almost totally.  After a number of swift successes, I feel like I am some what of an authority on the subject. 

It is still a bit of an unknown to most clients, agents are better informed but I still get questions like why wouldn't people just bit the base price.

So I thought it time to create a consumers guide/explanation. 

First a bit of background, then I will give a good example of how it has just worked.

Let's start with it's origin.  Range Pricing was thought up in Australia in a slow market.

It was scientifically tested and actually worked to increase the likelihood of an offer in a slow market.

Range pricing was designed to have a 20% range.   ( ie on a house prices at $200,000, the range would be $40,000) The idea was to offer an incredibly low bottom end price to get buyers into the property.  I think most of us have heard of creating a feeding frenzy as a pricing strategy.  Well this is similar.   Only you are suggesting that the listed price is a low and negotiations are from there up, not down. 

If you can get a flurry of showings early in the listing, not all will bring an offer, not all will offer above the low end, but someone will value it at higher than the low end.  And spurred on by the presence of other offers and a skillful negotiator/practitioner, will go higher to ensure capturing the home. 

So what about the question of buyers bidding only the low end? 

Well, doesn't it depend on the price?  Don't buyers and sellers set the price?  If a buyer thinks that the price is good, and there is competition, won't they go higher?  If they know the home is overpriced, and no one else in bidding, won't they low ball still?

So here is an example of one that has just worked so well for me.  see this listing which was a featured listing in Localism.  (bear in mind that the market is such that many homes are just sitting, but this is a very convenient, popular central neighborhood). 

My sellers worked really hard to follow my suggestions and stage the home.  Then we placed a price of $179k-189k on the MLS as 179k+.  We had 9 showings set up in 48 hours.

I was delighted to use and practice my negotiating skills, even before an offer appeared to indicate to customers that it was priced incredibly well and we expected to be at the high end.   

One by one the offers rolled in.  3 in total, from 6 showings( we cancelled the rest).  We played each off and with out even issuing a counter offer, we had buyers rewrite offers higher till we were above the top of the range.  (I can not disclose how much).  Result, offers written to suit the seller and happy sellers

I priced another home more aggressively, range priced $199,900-220,000,  a 10% range.  We had 3 showings, but 2 offers already in a slightly slower response time of 2 weeks.   This was a little risky because of the large price range, but I wanted to get listed under the price break of $200k.  

Did I get it sold?  Yes.  It took 10 days of hard negotiating, and the price wasn't quite as high as we might have hoped, but we did get an offer accepted, again well above the low end. 

Although the recommended range is 20%, in our market, agents often fix a range of $5,000 or about 2%.  This really does not do enough and is basically a fudge for bad pricing or giving in to sellers demands.  

Real Estate Guy sells residential real estate in Madison Wisconsin.  www.RealEstateGuy.net