Study Reveals the Best Technique for Pricing your Home...
The below information is taken from an article on RISMEDIA. Stay tuned for the ending to find out key takeaways!
Study Reveals Best Technique for Pricing a Home
The best technique for pricing a home when listing it for sale is setting the asking price just below a round number, according to recent research published by the Journal of Housing Research, an official publication of the American Real Estate Society (ARES).
"These findings will help real estate professionals and sellers of homes develop more informed listing and marketing strategies to better suit sellers' needs," says Ken Johnson, Ph.D., ARES publication director, real estate economist at Florida Atlantic University's College of Business and co-developer of the Beracha, Hardin and Johnson Buy vs. Rent Index. "The results of this study take a lot of guess work out of the marketing of homes for real estate professionals."
The study looked at 1,000 buyers in Virginia considering a pool of more than 370,000 listings. The researchers were able to determine the impact of "rounded pricing" listing strategies versus "just below pricing" listing strategies.
"Our study suggests that by using the just below pricing strategy sellers can price their home slightly higher without driving away potential buyers," says Eli Beracha, Ph.D., of Florida International University, who conducted the study with Michael J. Seiler, Ph.D., of The College of William & Mary. "As a result, they end up selling their house for more."
How does dropping your asking price ever so slightly impact the final outcome?
"On average, buyers are more attracted to a house priced at $199,000 than to a house priced at $200,000 and it appears that 'just below' pricing works out favorably for sellers in terms of their bottom line," Beracha explains. "Based on our research, the 'just below' pricing strategy yields a selling price that is, on average, roughly 2.5 to 3 percent higher, $5,000 to $6,000 on a $200,000 house, compared with a rounded pricing listing strategy."
While residential real estate agents widely disagree on the appropriate pricing strategy to use when listing residential real estate for sale, the researchers found that homebuyers more often prefer homes priced using a "just below" pricing strategy. This preference allows sellers to list their home for a higher initial listing price.
On the other hand, due to the demand effect, rounded priced homes typically have shorter time on the market and a lower discount relative to listing price. Their findings suggest that sellers' ability to set higher listing prices for properties using a "just below" pricing strategy outweighs the lower discount and shorter time on the market associated with similar rounded priced strategy homes.
"We tested the age-old debate concerning the best technique to price a home when listing it for sale," Seiler says. "We find that using a price just below a round number works best, particularly in connection to the left-most digit in the price. So, $199,000 works better than $200,000."
For more information, visit www.fau.edu.
Reprinted with permission from RISMedia. ©2016. All rights reserved.
The Good, The Bad, and The Ugly
The above article has some great points, mainly, that people’s perception of things reign supreme. Consumers will focus on smaller numbers instead of using their intellect. Why else would $199,000 sell so much better than $200,000? An excellent mainstream example of this is the price of gas ($2.999 ?!?!) This is a strategy that can certainly come in handy. However, this study and article has a major flaw, how to actually price your home! Having a realistic and practical approach to pricing your home is the key. One of the main reason houses don’t sell is because they are priced too high. Period. People’s perceived value of their home, and how much they can sell their home for, are different numbers. It doesn’t matter if you utilize this technique and price your home at 199,000, when it should be priced around 160,000. This is where your Real Estate Agent comes in to play. Trust your agent. I repeat, trust your agent! Your agent has experience and wants to sell your home as much as you do (after all, an agent eats what they sell!). Together, you and your agent will get your house sold!
Courtesy of Ellen G. Shaikun, Broker Associate, email@example.com
Berkshire Hathaway HomeServices, Parks and Weisberg, Realtors®
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