Shhh! It’s a Secret!
If you happen to work in my local market place, stop reading. This is one of the best conversations on any listing appointment I go on. But really…you don’t want to know.
Go on…go….
You Heard Me Right…Raise Your Price!
Last week I spent a few minutes pouring through the MLS and noticed the large number of agents that continue to price homes as if we are in a retail store.
I had an interesting response from Josh Ferris of Hudson Valley, New York. “It’s a psychological trick. Ask a friend: if two identical homes were priced at $299,900 & $300,000 which one would they rather see?”
What is $299,900? Does an agent actually believe that a consumer is psychologically fooled into thinking that this home is less than $300,000? That strategy is meaningful in retail when decisions are made in a few hours, minutes, and even seconds. But a home purchase? I’m going to take a leap here and suggest that whatever value that can be achieved by that psychological game, is far outweighed by what is lost. And what is lost? Buyer’s eyeballs.
It’s the Web Folks!
As a real estate professional, have you gone through the process of searching for a home recently? Really, go online and search for a home like you are buying one for yourself. We seem to all intellectually understand that a consumer’s home search begins online. So go take a look. Nearly every major search tool on the internet uses $25,000 or $50,000 increments.
So what happens when you price your listing at $499,900? Every buyer that just search $100 over that, $500,000 to $550,000 for example, just missed your listing. Bummer.
Big bummer.
Wouldn’t it be better to price that home at the price points on those search tools? By pricing at those $25,000 segments, you capture the broadest set of eyes on that home. No retail pricing game, but much better – eyeballs. Buyers.
So Go Ahead! Raise Your Price! (let’s just keep this between us….yes?)
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Consumerism, Geo-mapping columnist
Marketing columnist
I do this with my listings. At 300k, you get people searching from 250-300. You also get people looking from 300-350. You actually position your listing to be seen more often and by more prospects.
Another side note, when the buyer is searching for 250-300, the listings at 300 show up on the first page while the 299,900 show up on page 2 or 3 of the search. I’ll take front and center any day!
This is SMART. A brain-dead-simple strategy that blesses the seller, expands opportunity for buyers and accelerates an agent success. The best part it’s all free.
Thanks for sharing, I’m forwarding on to the team.
OK, I guess I’ll be the lone voice of dissent on this topic. First, to your comment:
“So what happens when you price your listing at $499,900? Every buyer that just search $100 over that, $500,000 to $550,000 for example, just missed your listing.”
This simply isn’t true. In my region, many home buyers who are searching on the internet often only put one price parameter in their search: MAX PRICE. If they do put in a MIN price it’s always with a reasonable spread between the two numbers. So in your example, if someone was truly looking for a home in the low $500K range, they’d initiate a search with a MAX of $550k, and probably a MIN (if any) of around $400K. In other words, if there’s one number they’re concerned with, it’s the MOST home they can afford, not the least.
In your example, setting the search parameters for a home with only a 10% spread in price is simply not using the tool correctly, and they (and ultimately you) are missing opportunities. It’s one of our “new” responsibilities as buyer’s agents to coach them on how to use these great home search tools to their best advantage.
Second, I think your strategy carries more weight when we’re in a seller’s market or even a more balanced market than where we’re currently at. But right now, buyers are still looking for VALUE. Consequently, if they’ve done their internet search parameters correctly, they’ll see both the $300,000 home AND the $299,900 home, and I can guarantee you the $299,900 will get as much traffic (if not more) than the $300K home. Why? Because if the homes are identical, as you stated, then the latter is the better VALUE.
Just my $0.02….
Respectfully,
Chuck
Chuck’s thoughts are 100% in line with my own so thanks for saving me the time of having to write all that!
There may be a very, very small percentage of home buyers who search for homes within a $50,000 range but it seems too minute of a number to be used as a search usability measurement.
And for what it’s worth, it’s not deceptive in any way. $299,900 really IS lower than $300,000 no matter how you cut it.
I started doing this a couple years ago when I came the same realization. Increased showings . Increased sales. If there was no searching on the internet, that’s one thing… But with the internet search tools, you have to be smarter than the tool.
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Linsey, it’s always scary to determine which bracket clients should go into because you are right, search functions keep them listings separated into brackets. It’s almost like taxes, no?? Make X amount, pay X dollars… make X+1 amount, pay X+100 dollars.
What I hear you saying is that if someone wasn’t going to buy a house at a $100 higher (and don’t have the understanding/mentality/coaching from agent that listings are negotiable), you’re right, it’s probably better to be the lowest priced home in a higher priced bracket.
I would hate to be in your market, we’ll just stay over here away from you
[that's a compliment, in case anyone reads this and doesn't know we're friends]
Linsey, I have been implementing this pricing method for about the last year. The sellers understand why this makes sense but listing agents still don’t seem to get it. Even worse are the listings price at $299,999. When the listing agent receives a sign call I wonder what she tells the potential buyer the price of the house is. Does she say $299,999 or $300,000?
Lindsey, I agree with you and I do in fact price like you at times.. Seems a simpler way to do things..
NICE INFO NUGGET! I WILL SPREAD THE WORD.(RICHMOND,VA)
Linsey,
You just blew the doors off of my secret. I started pricing at the increments of online search tools back in 2005. It does bring my eyeballs to a listing and can amount to more showings.
Lindsay, I do this on some of my listing when I need a broader appeal. Psychologically retail or not I do think people think less at the 199,900 price. But, when I want to get the most exposure then I go right on the 300.000. price.
With all the big search sites in increments…that is smart.
You weren’t supposed to let this little trick out of the bag. Hopefully Atlanta area agents will miss this one article, if not Thanks for exposing this marketing tool.
Great tips and several things I’ d not thought about.
Thank you for posting about this…
If your going to raise something be sure to raise the commission to the buyers agent and they will show their clients the property weather they find it online or not. I raised the commission on one of my listed properties that hadn’t shown in a month from 2.5% to 3.5% on a Thursday showed twice on Saturday and currently in contract negotiations.
It’s interesting that you’ve written about this because I’ve had this conversation with sellers in the past, some agree and some don’t. I buy into it because maximum exposure helps sell.
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@Barry – Goes to show you the greedy thought process of some agents. Very sad.
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I have a listing for over 1.5m that when I had it at 2.5 co-op, no one showed. Once it got to 3, I had action.
Greedy? They make Gordon Gekko look like a bunny rabbit.
I agree completely with you. When I’ve got a listing that is at a $25,000 increment, I always price it at $200,000 rather than $199,900. Plus, since almost every site sorts them with the most expensive homes first, my $200,000 will beat your $199,900. Since so many people search for homes while they are at work, and may not have time to get to page 2 or 3 of the listings, it’s important to be on the first page if you can.
But, if I’m not at a multiple of $25k, I do use the psychological trick of the lower price. I think it’s important to get the seller prepared for negotiating. An offer for $180,000 when the house is listed at $189,900 doesn’t sound as low as if the house was listed at $190,000.
Funny you should mention countering back…we always counter back on the dollar. Like if it is listed at 189,900 and we want the home, we counter at 180,000, not 179,900.
I’m sticking by my guns, folks. Here’s a live example:
There’s a home in my market that’s currently listed for $899,000 (this is California, so don’t get hung up on the freakishly large number!) It got 5 offers, all OVER $900,000. Would they have gotten this many offers (or more) if they listed it at $900K? Hard to say. What about $910K? Definitely not. Why? Because they would have missed many potential buyers who was searching online for a home for $900K or less.
I know what you’re thinking…”The home is now more expensive than what the sub-$900k buyer can afford.” But you all know that the emotional side of the brain completely trashes the rational side of the brain when it comes to kicking in a few more $$ to get what we want. Just try buying a TV or computer nowadays.
Bottom line — pricing this home at $899,000 (instead of a few bucks higher) was a brilliant strategy.
We try to price on whole numbers to facillitate more people finding the listing in internet searches. It seems to work. The seller is the boss, however, and if after a discussion of pricing strategy they choose to go with a different number, so be it.