I feel like I written this before, and maybe I have in another form. My friend was advertising an Open House today on Twitter, and mentioned the price was $152,631. That struck me. I have never understood the “odd price” club that sets prices ending with 678, 961, and so on. I look at where all the primary Real Estate search sites set their search points.
If you take most of the major sites, they started at $25,000 (Prices ending in 00,000/25,000/50,000/75,000) increments for all searches, some still do, but most Buyers still think in the $25,000 price increments, if you ask a buyer what price point they are searching up to they will not say $215,000, they say $225,000. It is a conditioned response, from so many years of practice (think Pavlov’s Dog here). The psychology behind a lot of marketing is in the learned behaviors of the general public, and what their conditioned responses are, in the case of Real Estate it is ALWAYS thinking in $25,000-50,000 increments. For instance, how many of you have heard this statement “We are looking between $350,000-400,000, but are comfortable closer to $375,000”, I would guess 100% of Real Estate Agents who have been in the business for more than a month have heard this.
When I go to listing appointments I always bring this up, and my clients usually go with my pricing recommendations – why price at $401,000 and miss a large buyer pool when the next search increment is $1,000 less. The one downside of this theory – and a nasty pitfall, is the “Bargain Buyer”. If a Buyer is comfortable at $415,000, but wants to search up to $425,000, that $425,000 house will usually be more appealing, and the Buyer will justify their view by assuming the house is overpriced (even if it is not, this is actually an example of a listing I had last fall). The Buyer will then offer $400,000 with the expectation they will knock the price down. A house that perhaps should be priced closer to $430,000 or more, sometimes the rule needs to be broken. When pricing at a $25,000 increment marks the downside is that this as the high-end mark in a buyers range will be appealing and you will receive low ball offers, on the flip side, if you are the low-end of the range ($425,000-450,000) they you will appear to be a bargain.
I guess it really all comes down to perception then doesn’t it? But for the best marketing exposure, price AT a $25,000 increment, and not at $x99,000 point, where you miss a WHOLE pool of Buyers.
How do you price your listings? What do you advise your Sellers?