Updated: 8/26/2011 1:10 PM ET|
The psychology of pricing your home
No. 8: Stake out the top end of a price range. Buyers are prone to creep into the price bracket above their target range. "Buyers always spend a little more than what they first think. Nine times out of 10, if they're looking for $300,000, they're going to bump that to $350,000," DellaLoggia says.
Today's low interest rates encourage this: Each additional $10,000 in price (at 4.5% over 30 years) adds only about $50 to the monthly principal and interest.3
Once buyers open the gate to a higher price bracket, they focus on homes at the higher end of the range, DellaLoggia says. Since they're spending more, they're looking for a big bump up in quality.
The lesson for sellers: Choose your competition wisely. Once buyers hit the search button, they see all homes in a price range at once. Your $510,000 home will suffer in their eyes next to one at $550,000.
If $510,000 is your correct price, in this tough market it's best to scale back to the top of the $475,000 to $500,000 category.
Interesting note: Homes on Zillow are much more likely to be priced just under a break point than just above it. You'll find three times as many listings in the $10,000 range just below a $100,000 increment as in $10,000 range just above it, the company says.
No. 9: Don't try to build in discounts. "You can't price your home for the lowballer. You'll only get lowballers looking at your home," DellaLoggia says.
Her rule of thumb, which she attributes to Coldwell Banker Realty: If your home's condition is 95% the best it can be, price it within 5% of what you think the selling price will be. Example: If the house will sell for $275,000, add 5% to take it to $288,000. You can even try $300,000. But not $325,000.
No. 10: When you must drop the price, be decisive. When your home has languished on the market for months, you need to engage a fresh group of shoppers, Halstead Property's Phillips says. An incremental discount won't work. Bite the bullet and make your price drop substantial.
How substantial? It depends, Phillips says -- on the property, the market and the psychological implications of the new price. A 15% reduction on a $240,000 property might be about right, except that it leaves the price at $204,000, so you'd also consider the added boost to be gained from dropping it to $200,000 or $199,000.
On the other hand, 15% off a $2.5 million property brings it to $2,125,000, a bigger reduction than necessary to get it before new eyes. It's an argument for engaging an agent who knows the market inside and out.
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