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New concept in setting home sales price taking hold

By: JESSICA MUSICAR - For the North County Times
NORTH COUNTY -- Selling a house, as many homeowners know, can be a long, drawn-out process that sometimes lasts for months. But one innovation is changing the way real estate is sold.

A new system, known as value-range pricing, markets a piece of property on a scale rather than a standard fixed price.

For Carlsbad resident Sherri Provansal, the scale made bidding on her house more palatable and sped up the entire process, she said. The seller asked for bids between $775,000 and $850,000. Provansal's offer of about $805,000 was immediately accepted, she said.

"We had a price in mind, but seeing the range gave us the confidence to make a reasonable offer," Provansal said.

Value-range pricing makes up approximately 40 percent to 50 percent of real estate sales in California, said Ed Culbertson, head professor of the real estate department at MiraCosta College.

In San Diego County, about 40 percent of real estate sales are done on a value range. In Carlsbad, it has reached 50 percent, said Carlton Lund of Prudential Real Estate. Value-range pricing is now on a national scope with several hot spots in the Midwest and East Coast. However, it has not caught on to the same degree as in San Diego, he said.

"Just like anything else, it takes time to grow," Lund said.

Lund is one of the first agents in California to use the price-range system, which was introduced in 1995. The system can also be used with commercial property, Lund said.

The range stimulates more offers in a shorter amount of time because many people will be able to afford a house with a wide price range such as $130,000 to $170,000 rather than a fixed price of $150,000, he said.

A person who cannot afford or plans to spend only a certain amount on a house is often discouraged from making an offer on a home with a fixed price, even though it may be only $10,000 out of their range, Lund said.

A house sold on a scale, however, is appealing to more people because a larger percentage can afford to make an offer, Lund said.

"If you have a fixed price that is too high, no one will react to it," Lund said.

On the other hand, sellers might fear that using a range will get them less money than they had hoped. Lund said this isn't so. Instead, because more people are likely to bid on a ranged property, the seller often finds an offer that is appealing to him. It can also open the door for negotiations. Fixed price housing doesn't garner the same type of response, Lund said.

"Until you lobby a ball across the net, you have no game ---- this begins the communication process," Lund said.

As people realize they can afford even the lowest part of the range, more will attend an open house or showing. If they like it, they may be willing to come up with extra money to put on the table, Culbertson said.

"If it weren't for value-range pricing they would have never come to the property," Culbertson said.

Because the range system tends to draw more potential buyers, it increases the level of competition between them, Lund said. This drives up the price as they attempt to outbid each other for the prize.

"It's the same as eBay when you have two bidders competing against each other.

"The bidders are willing to pay more when they see other bidders are willing to pay more," said homeowner Steve Cade. Cade has sold several of his houses and rental properties with the help of Lund and value-range marketing.

The range system also speeds up the selling process because as more offers are made, the house will more likely sell, Culbertson said.

A real estate broker, Culbertson said he prefers value-range pricing to fixed prices because in a fast-moving market it is difficult to pinpoint the true value of a home. The range generally hits within 5 percent to 10 percent both above and below the value of the home.

One crucial factor to making the system work for both buyers and sellers is that they have a real estate agent who is both a good negotiator and familiar with the value range pricing, Cade said.

"When you take a Realtor that has the skills, they can deliver higher sale prices for respective sellers," Cade said.

Not every real estate agent likes the system, nor does every seller choose to use it, Culbertson said.

Real estate broker James Cothran of Realty Executives in Carlsbad said he has used value-range pricing several times, but does not prefer it. However, the decision to use the system is up to his client.

"I would lean toward a specific price initially. If there were extenuating circumstances, then I would go to value-range depending on the input of the seller," Cothran said.

Value-range pricing was developed in Australia in the early 1990s. It was then brought to California in 1995 by Greg Toyoma for a real estate convention held by Prudential Real Estate, Lund said.

Lund said he is one of the first agents to try out the system. Although he was only able to sell 13 houses using price ranging in 1995, he kept with it, selling 400 this year.

Since learning the system he has also trained agents across the United States from Prudential and other agencies.

"I feel good about this system because we have changed the way pricing is going in America," Lund said.

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