Updated: 8/26/2011 1:10 PM ET|
The psychology of pricing your home
Finessing the numbers
No. 3: Decide how quickly you need to sell. Ask yourself which you need more: time or money. DellaLoggia says there are only a couple of correct prices for your home: the sell-in-30-days price and the 60-to-90-days-on-market price. If your house is worth $415,000 but you must sell quickly, price it at $400,000. If you can wait 60 or 90 days, try $425,000.
No. 4: Massage the last digits. Many salespeople prefer numbers ending in nine. "Is it $15.00, or $14.99? If it's $14.99, the buyer thinks it's $14.00," says Andrew Phillips, an executive vice president of Halstead Property, which serves New York City, northern New Jersey and parts of Connecticut. He teaches classes in pricing to his firm's agents.
Not that anyone's fooled, but a precise number indicates deliberation, lending it credibility. Above all, you're supposed to avoid zeros. (See "Selling a house? Try to avoid zeros.") Round numbers invite buyers to negotiate, this thinking goes. Take $300,000: It supposedly tells a buyer, "Make an offer." What about $293,750? The difference is less than $7,000, yet the latter price seems to be not only a better deal but also a more-definitive, firmer price.
Be careful, though; these "rules" can backfire. "We've found that listings priced at $324,999 sell at a larger discount to list (price) than those priced at $324,500," Kelman says. "That's probably because buyers perceive the price ending in '999' as being a cheap gimmick, whereas those ending in '500' seem carefully priced."
At best, twiddling with the last digits delivers only "incremental" benefits, Kelman says. Yet it's hard not to try for every possible advantage. Kelman found himself doing exactly that when he recently sold his home in Seattle, selecting a price ending in 550.
No. 5: Embrace the zeros. Here's another school of thought: If you want to draw the most eyeballs to your Internet listing, you should select a big round number, like $400,000, says DellaLoggia. This doubles your home's exposure, putting it in searches for properties priced at $300,000 to $400,000 and also in searches for $400,000 to $500,000. The next-best option is a price ending in a $50,000 increment, such as $250,000. And then $25,000.
Evidence suggests buyers know this. The real-estate website Zillow.com examined the 3,470,804 home listings on its site in one recent weekend and found that 97% ended in a zero. The next-largest group, just 1%, used a price ending in 9.
Sellers prefer nines, however, for the second digit in a price ($290,000, for example).
No. 6: Think in increments of $25,000. Most listings sites force buyers to define their searches in increments of at least $25,000. In price brackets above $500,000, some sites offer searches only in $50,000 increments. If your home would be accurately priced at $419,000, you might as well offer it at $400,000 or $425,000 -- the same shoppers will see it.
Yet it's interesting to note that, while roughly half of Zillow's unique users in a recent check actively searched for or were "thinking about buying" a home, most (92%) browsed through the listings rather than using the site's filters to search by price range.
Among those using Zillow.com's price filters:
- Most used $100,000 increments (example: "$200,000 to $300,000" or "$250,000 to $350,000").
- $50,000 was the second-most-used increment.
- $200,000 increments were third-most-used.
- $150,000 increments ranked next.
No. 7: Know your price bracket. Buyers shop by price ranges (also called brackets). These aren't hard-and-fast categories; they're psychological break points that help buyers -- and their agents -- organize searches.
Brackets vary by market and by price. An experienced agent is the best guide to your particular market. At the high end, a bracket might span $250,000 -- from $1 million to $1.25 million, for example. Under $1 million, breaks might occur every $100,000, down to $500,000 and then every $50,000.
It's important to select your price bracket thoughtfully. "We've analyzed this and found that moving from one price 'brand' to another -- say, the difference between $324,500 and $325,500 -- can reduce traffic to the listing by as much as 7.1%, which is significant," says Kelman, of Redfin.
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