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The Impact of Range Pricing on Marketing Time and Transaction Price: A Better Mousetrap for the Existing Home Market?

Abstract

In various markets around the country, some real estate professionals are employing a new pricing strategy that involves marketing homes for sale with a price range rather than a single asking price. This strategy is often touted as a mechanism that will attract more potential buyers to look at a house and thus result in reduced marketing times for existing homes, with prices determined by competitive forces. The purpose of this study is to empirically examine whether houses using range pricing, often referred to as value range marketing, sell in the same amount of time and sell for similar prices as those marketed in the traditional manner. Two staged least squares with a correction for sample selection and Weibull duration models are used to test the hypotheses, employing a sample of 5,852 residential houses that were sold during the period January 1999 to December 2000. In contrast to claims of the strategy’s proponents, the results indicate that houses take longer to sell when using the range pricing strategy after controlling for physical characteristics and market conditions. Furthermore, there is no evidence that this strategy has any significant impact on transaction prices.

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Correspondence to Marcus T. Allen.

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Allen, M.T., Faircloth, S. & Rutherford, R.C. The Impact of Range Pricing on Marketing Time and Transaction Price: A Better Mousetrap for the Existing Home Market?. J Real Estate Finan Econ 31, 71–82 (2005). https://doi.org/10.1007/s11146-005-0994-4

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  • DOI: https://doi.org/10.1007/s11146-005-0994-4

Key Words

  • value range marketing
  • listing price strategy
  • time on market
  • residential brokerage