Trying to Sell Your House? Use Range Pricing.

Of course not. Everyone knows that houses rarely sell for the listing price. Yet, the listing price is important, even critical, to the home buying/selling process. Why? It has to do with the Multiple Listing Service. Real estate agents around the country use it or a system similar to it to list homes they are trying to sell for their client-sellers and to find homes they are trying to buy for their client-buyers.

Consider Wendy and Adrian. They want to buy a house. They've been pre-qualified by their lender, and they know how much they can afford to pay for their new home. They also know how much they'd prefer to pay. So when they hire their real estate agent, Rosa, they do what all buyers do: They give their real estate agents an upper limit.

Kathy's house is on the market, listed at $299,990. Will her house sell for that price?

"We'll consider anything up to $300,000," they tell Rosa, even though they'd really rather spend - and they hope they find something for - just $275,000.

"No problem," Rosa says, who then goes about the process of finding every house in the area that is being offered for sale for $300,000 or less. It takes her about five minutes.

Rosa sits at her computer screen and accesses the MLS. At her desk, Rosa tells the computer the criteria to use in producing its list of candidates. Of all the criteria Rosa uses, one piece of data is more important than all the others: The sales price. She enters $300,000.

Minutes later, Rosa has a detailed printout of every home in the area that is for sale with a list price of $300,000 or less. She picks a dozen homes from this list that seem to match Wendy and Adrian's other criteria and the house-hunting begins. If Wendy and Adrian don't find what they want in this group, Rosa will produce a second list for another day of house-hunting.

Eventually they find something they like. It's the house Kathy has listed. Wendy and Adrian make her an offer, which Rosa will present for them to Kathy's real estate agent.

You can be sure of one thing: Wendy and Adrian will not offer to pay Kathy's asking price of $299,990. Therefore, the negotiations begin. They'll offer less, Kathy will counter-offer, and eventually everybody will reach an agreement. Or not, in which case Wendy and Adrian will bid Kathy good-bye and continue their search.

The only person truly unhappy in this entire process is Will. He lives down the street from Kathy, in a house similar to hers, but with a finished basement. Will figures his house is worth at least $300,000, though he might be willing to accept a bit less. Kathy's house is worth only $285,000, he figures, but if she's listing hers for $299,990, then he'd better list his for more. So he prices his for $310,000.

But he'll never get an offer from Wendy and Adrian. Even though he's willing to accept less than $300,000, and even though Wendy and Adrian are willing to pay up to $300,000, the two parties will never meet. That's because Rosa worked from a list of all the homes listed for $300,000 or less. That's just too bad.

It's also too absurd. Everybody knows that the listing price is bogus. It's merely a starting point, and not necessarily an accurate or realistic one at that. So even though Wendy, Adrian and Will are all willing to be flexible in their pricing, the MLS and similar systems aren't. You tell the computer $300,000, you get $300,000.

This is why real estate agents tell sellers to list their homes for amounts just below certain thresholds, and it explains why you see houses listed for seemingly-silly prices, like $299,999 or $249,499. You might ask yourself, "Who is that seller trying to fool?" It's not you they're trying to fool - it's the computer they're trying to fool! But many sellers, like Will, do not price their houses this way. It's either because their real estate agent isn't sharp enough to recommend that strategy or because Will has rejected the idea. After all, Will figures, if he lists the house for $310,000, he might get $305,000 - but if he lists it for $299,999, he's certain not to get $305,000. So he lists it for $310,000 - and gets nothing.

This is also why real estate agents tell buyers to increase the maximum amount they're willing to pay, at least for purposes of accessing the computer. Rosa wanted to produce a list of all the homes selling for up to $350,000 - not just $300,000 - because that would have enabled her to include houses like Will's. But many buyers, like Wendy and Adrian, often do not accept that idea. It's either because their real estate agent isn't sharp enough to recommend that strategy or because Wendy and Adrian have rejected the idea merely as a tactic to get them to buy a more expensive house, which would increase Rosa's commission. So they stick to their $300,000 limit - and they never see their "Dream House" that Will is selling.

If you think about it, this entire process is dumb. It places incredible importance on the listing price, even though everybody involved in the process - the buyers, the sellers and their real estate agents - know that the list price is not going to be the house's ultimate selling price.

There's a new, better idea. It's called range pricing.

The next time you list your house for sale, don't list a price. Instead, assign a range of prices that you're willing to consider. For example, Will should list his house for $275,000-$315,000. Worried that buyers will simply offer you the low end of the range? Don't be: In San Diego, where this idea was first test-marketed, houses using range pricing tended to sell above the range's mid-point. As long as the range is reasonably based, buyers have proven to be fair.

The best news is that houses listed with range pricing have sold in a fraction of the time it normally takes to sell a house. Why? Because by listing the entire range, more potential buyers are exposed to the house, and the more people you get to see your house, the quicker it will sell.

The only problem with range pricing is that, so far, the MLS system cannot handle it. The system demands that you enter only one price for the listing. But you can get around this problem easily. First, list in this space the lowest price in your range (so that the house will be included in the type of search Rosa did) and then add a footnote to the listing that describes the range pricing. Then just make sure all of your other marketing - newspaper ads, flyers and for-sale signs - prominently displays your range pricing.

This is a fabulous new idea, and it's quite possible that your real estate agent hasn't yet heard of it. If your agent is not willing to try this idea, find one who will. People who do this never go back to the old way of selling real estate, and it will be only a matter of time before the MLS and competing systems catch up with this new, improved way to sell homes.

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