Charmed, I’m Sure: Pricing a Home to Sell
When it comes to selling a home, the big question agents and homeowners wrestle with is, "How much should we ask?"
According to a recent study, the asking price should be slightly less than a round number. Sound familiar? It should. We see it daily. "Charm" pricing is a proven pricing strategy.
RIS Media reported the study published in the Journal of Housing Research, a publication of the American Real Estate Society (ARES). The study included 1,000 Virginia homebuyers who considered some 370,000 listings. Researchers examined the impact of rounded-priced versus just-below-priced listings.
Researchers found average buyers are more attracted to a home priced $199,000 than to one priced at $200,000. They also found that the lower price often yields $5,000 to $6,000 more for the lower-priced home because homes may be listed higher initially.
Real estate agents may not be totally onboard with this approach to pricing. That’s because agents set up automatic notifications for prospective buyers based on a price range. A home listed at $149,000 won’t show up if a buyer is looking in the $150,000 to $200,000 range. Take that into consideration when pricing a home near a multiple of $50,000.
Demand in many Texas cities is so great that rounded-price homes are usually on the market a shorter time and with a lower discount. The ARES research suggests that just-below pricing outweighs the quicker sell time and lower discount.
Some 2015 research on charm pricing discusses the so-called "left digit effect," which proposes that people place disproportionate importance on the leftmost digit shown in a price. So, $49.99 seems closer to $40 than $50.
In a September 2016 article titled, "The Psychology of Pricing: A Gigantic List of Strategies," author Nick Kolenda says, "Charm pricing is most effective when the left digit changes. A one-cent difference between $3.80 and $3.79 won’t matter. However, a one-cent difference between $3.00 and $2.99 will make a huge difference."
All things being equal, a home priced at $299,000 gets more attention than one listed for $300,000.
Apparently there is magic in the number "9." Just ask the folks at the 99 Cents Only Stores.
Other helpful articles on pricing a home to sell:
- "Not sure how to price your home? Avoid mistakes with these tips" Houselogic.com
- "5 Strategies for Pricing a Home to Sell" Reader’s Digest
- "Pricing Your Home to Sell" HGTV
- "Your Home’s First Price Should Be Its Best Price" Realtor.com
