Pricing your home to sell – Science or Art?
Is it a science, or art, pricing your property to sell?
Do you want to just list it, or sell it?
Selling a home in Hawaii, Maui or Oahu? The price to sell is a direct function of marketing. A strategic market price will complement our marketing campaign and position your home effectively in the marketplace.
Let’s look at few ways that psychology can influence the price.
1. The $9.99 syndrome
It amazes me how many agents price a home with a 95, 99 at the end. You always see $395,000 $299,999 or $199,900.
Why does 99 percent of the agent population follow the crowd, and supermarket mentality, and price the same way?
Many agents are not looking at the price as a function of marketing. It has been said the 9’s first appeared in the 1880s convincing the gullible that they were getting a bargain. Many discounters still use 99 in their pricing, but it does not fool smart people.
The main reason it can hurt your listing is that most buyers start their search online, on a smartphone or tablet when looking for a home. Whens the last time you said, or heard, “Hey, lets buy a house, let’s go talk to a real estate agent at his office”, If a buyer is looking between $500,000 and $525,000 for a home, and you priced your at $495,000 or $499,999, that buyer may never see the property online.
The best advice is to price at $500,000, as you will capture both sides of the search. Someone looking between $450,000 and $500,000 and someone looking between $500,000 and $550,000 will find the property online.
Also, you should position your home as luxury brands do, not as discounters. For instance, Godiva chocolate prices at $36.00, not $35.99, and Neiman Marcus prices at $625.00, not $624.99. Ferrari and many other luxury brands also use this model for their products.
Do they know something or is this just coincidence? Does the consumer perceive this as a higher-quality product? These brands apparently think so.
That same home, listed online, is actually losing buyer traffic because of its pricing gimmick. The reason is simple, and it should be an obvious reason to never use the “99” pricing model again.
Online buyers search in zeros. Buyer A searches for homes from $500,000 to $600,000. Buyer B searches for homes from $600,000 to $700,000. That’s the way MLS’s, portals and agents’ websites have set up the pricing parameters. With a listing priced at $600,000, both Buyer A and Buyer B will see the home. Priced at $599,999, Buyer B won’t see it.
It’s tempting to believe that you’d miss out on only a small percentage of buyers or that most buyers won’t set a “lowest price” in their search, but it’s simply wrong. Our company has a client database of around 8,000 users, and we track their searches on our websites. The majority of users set a fairly tight price range in their searches. They know what they can afford and don’t want to waste time looking in a price range that they know won’t fit their needs.
Don’t let your listing miss out with a .99 gimmick. Over ninety percent of buyers are searching online. Price the home the way buyers search.
2. The power of four and seven
Studying the psychology of price, the concept of the power of four and seven is evident. For example, a price of $447,000 or $444,000 is precisely priced, and appears that the seller has scrutinized true market value, which could suggest to the buyer that there is less negotiation room. This assumption benefits the seller.
Another reason is that the price is unique and stands out to the buyer. Think about all the property listings displayed on all the website portals, like way too many products on a shelf at a store. A unique price, unlike the others, stands out. Because it’s different and more unique, it will attract the buyer’s attention. Examples of this would be Costco or Wal-Mart, who use the four and seven frequently on their sale items. They want to differ from their competitors.
There is also something call the “Right Side Digit Effect.” So, a price of $527,000, has the perception of looking like a better discount or value than $529,999.
Some believe that using the four and seven in your pricing is more emotional to buyers. It’s a friendly number that leverages the buyer’s ego and self-image and has a higher perceived quality of what you are selling.
And don’t forget — seven is a lucky number
3. Avoid an agent who is “Buying” your listing
Some sellers who price high are given false hope by unscrupulous or newbie agents who are uncomfortable telling their clients the truth.
Beware of ‘Sign Agents,’” buying your listing, what’s a sign agent? Some agents will agree to any price you want, just to get their sign on your lawn, then work you down to a realistic price, costing you time, and money.
Instead of listing at the inflated price, “come to realistic expectations of what your home will likely sell for.”
Imagine you want to buy a gallon of milk. You eye the case, shelves stocked with dozens of choices, but they are really all the same. Milk is milk, and which one you select is really insignificant because they are all identical, and they are all priced the about the same.
But what if each identical container was priced differently? Odds are you have set aside enough time for your shopping , and you carefully check the price labels and go for the best deal. Or maybe you are drawn to the more attractive packaging?
When selling your home, attractive pricing and packaging are arguably the two most basic essentials. In our current real estate market, the buyers have lots of choices. In many areas, the shelves are simply overstocked. And since no two homes are the same, making that distinction between your home and the dozens of others is key to getting offers and selling.
Where pricing is concerned, establishing that all important asking price is part science and part art, and there are several things you should consider.
- Study past sales. This is the starting point for any thoughtful and successful pricing strategy; think of the “science” part. Take the time to study past sale statistics for homes in your area and areas similar to yours. None will be identical, of course, but having a clear understanding of true market value is the first step in establishing your selling price, or your listing price.
- Do not confuse active listings with past sales. Active listings have not sold. They are just your competition. It is important to be aware of your competition’s pricing, but this is often just an reference of what your home won’t sell for.
- Do not overprice because you have “time.” If the market is rising, this strategy may work, but if prices in your area are declining, or flat, you may quickly find yourself chasing the market and costing yourself time and money. And if the market is stable? Your home will just sit as another listing. Buyers pay in today’s dollar value, and time is rarely on your side.
- Leave some room for negotiation, but don’t overreach. No seller wants to feel he left money on the table, and no buyer wants to overpay. Your price should give both parties room to maneuver, but if it is too high, you may be perceived as unrealistic, and buyers will pass over your home.
- Think like a buyer. What are the things that you value in a home? Is it a large yard, an updated kitchen or a view? These are likely the same things that your buyer values as well. Talk to your agent about current buyer trends. Yesterday’s avocado green shag carpeting is today’s granite countertop. The property facing the interstate is going to be a tougher sell than the one with an ocean view. Your price should reflect how your home truly compares to the others offered for sale. Buyers will find objections to any home, as none is perfect, but it is curious how quickly objections disappear when the price is compelling.
- React swiftly and decisively. If your home is on the market and is not being shown or if you receive feedback that you are priced too aggressively, be realistic, don’t hesitate to adjust your price. Bad news, like spoiled milk, doesn’t get better with time.
Do you want to list it, or sell it?