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

Posted: 29 Dec 2004

See all articles by Marcus T. Allen

Marcus T. Allen

Florida Atlantic University - Finance & Real Estate

Sheri Faircloth

University of Nevada, Reno - College of Business Administration

Ronald C. Rutherford

University of Texas at San Antonio - Department of Finance

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 suing 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.

Keywords: Value range marketing, listing price strategy, time on market, residential brokerage

Suggested Citation

Allen, Marcus Tillman and Faircloth, Sheri and Rutherford, Ronald C., The Impact of Range Pricing on Marketing Time and Transaction Price: A Better Mousetrap for the Existing Home Market?. Available at SSRN: https://ssrn.com/abstract=634207

Marcus Tillman Allen (Contact Author)

Florida Atlantic University - Finance & Real Estate ( email )

2912 College Ave
Davie, FL 33314
United States
954-236-1063 (Phone)
954-236-1298 (Fax)

Sheri Faircloth

University of Nevada, Reno - College of Business Administration ( email )

Reno, NV 89557-0016
United States
775-784-6993 ext. 305 (Phone)
775-784-1769 (Fax)

HOME PAGE: http://www.scsr.nevada.edu/~fairclos

Ronald C. Rutherford

University of Texas at San Antonio - Department of Finance ( email )

San Antonio, TX 78249
United States

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