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Home Selling 101 - Strategic Pricing

Over the past 21 years I have always believed that the best pricing strategy was to make the price appear as low as possible. For example if I had a property which I felt was worth $150,000 I would list it at $149,000 in the hope that a person would think it was a better value. I had been taught that my entire career.

I have recently changed my strategy to meet the current market conditions. If you have ever searched for a home I am sure you have noticed that all websites allow you to choose a price range for the property you are searching. If you use the prior example ($149,900) and you were to search for a home in the $150K range you might search $140,000 - $150,000 and it would show up in your search results.

In that case it would be in the high end of the range you were searching and in that were the range you were looking at, you may be more apt to want to make a low offer should you decide to purchase the home. Let's assume another buyer was looking at slightly more expensive homes in the $150,000 - $165,000 price range. In that case your home would not show up as it is below $150K... right?

With my new strategy of listing at an even round number of say $150,000, that same home would in fact show up in both searches. By showing up in the low end of the higher priced search, the buyer is less likely to make a low offer as it is at the low end of the search criteria. Naturally if there are few homes in any given price range the search parameter may be much wider but I am sure you get my point. For this and other tips visit my website at www.JulesYates.com.

Posted by Jules Yates on 08/24/2009 05:48 PM

Comments (128)

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128 Comments on Home Selling 101 - Strategic Pricing

AUG

I like it. Good reasoning. Now all we need to do is compile a list of the most popular sites and see how they break down price ranges.

Agreed. I don't list often but when I do, it's an even number at the high end of the desired price.

That is logical reasoning, for sure. And, hey . . . we all have to adjust to the market, right?

Jules ~ This is a subject that I have thought a lot about. It appears that we generally have the $19.99 syndrome in real estate where we think that the lower price will fool buyers into thinking it's a better deal. I currently have two properties on the market - one priced at $115K and the other at $154K - so you can see what side of the fence I come down on!

My reasoning started out like yours, but with one added factor. I've worked with a lot of buyers in the last 4 years and if a property was priced at $149,900 for example, then they just ignored the $900 as if it wasn't there when it came to making an offer. When it came to listing homes I figured if buyers are going to ignore it I might as well not have it there in the first place and go with the next round number. (I hope that makes sense - it does in my head.:-)

Denise

I have never had this happen yet but when I do I will keep your article in mind. Thank you

Jules, I try to get my clients to price this way but most of them know far more than I do!

Good point. I would not have thought of that, but I will use this strategy in the future.

Oh gosh I've been doing this for years. The ones I love are the agents who always have their prices end a certain set of numbers. As soon as you see them in the MLS you know exactly who the listing agent is.

This was definitely food for thought. I will have to bookmark this for future reference. Thanks!

Jules, this does make a lot of sense. I think I'll do some testing and see what happens.

Jules, I have been pricing like this for years and it really does make a lot of sense.

Great advice -- yet so simple. Like you, I have always listed by the "149,900" theory, thinking this puts the home in the "under $150,000" category. I will try to implement this, but hard to teach an old dog new tricks.

I call it "Node Pricing". Putting the price at the intersection of more than one price range... So, $143,000 is a round number, but not likely to fall into two search criteria. But, $150K would.

Jules,

I don't think that strategy necessarily works everywhere when it comes to searches.

But, I do agree with the higher listing number in most cases.

Brian

smart idea. I never thought of that before. I may do more of the 150,000

I changed my thinking on this a year or two ago, for this exact reason....sellers love it, as they never thought of it, and they think you are a genious...or at least a professional in touch with todays internet savvy buyers...

Jules - This was something I learned some time ago...just wish I could remember from who. It definitely is a great way to bring more activity to a listing that might not otherwise found when searched for by an agent or a buyer.

We learned this awhile ago, like Donna and do it always. Why not? It makes perfect sense to me. As an aside, I just read today to price a home several thousand dollars under the high number. Huh? Makes no sense after knowing this strategy.

Sharon

Now this makes a lot of sense. It looks like a strategy that should be tested.

This makes sense when you're working with a round number like $150,000.

Hi Jules -- You raise an excellent point about price ranges and the Internet drop downs with 25K increments oftentimes.

Jules, out of all the blogs Ive read tonight, not controversy. It makes sense, I hope we aren't missing something.

AUG

Jules, I thoroughly agree with your new strategy of achieving presence in multiple price bands.

Jules:

Your point is well taken. However a good agent would do both searches because in each market there are break points. Also, sometimes if you are too restrictive on criteria you don't get the true picture in the results you are seeking. For instance I might be searching for a 4 bdr 2.5 bath 2 story home. If I say I want 2 full baths and 1 half bath, I may miss the house that has 3 full baths and 0 half baths. I always go to the tier below the price point I want and to the tier above. The reasoning is that in a slow market I might find that bargain or stale house in the wrong category, and it might be the right house for my client.

Jules:

Other than location, location, location; price, price, price is the most important. I have seen a lot of properties that have been priced right move quickly in this market. Something to be said about the price being right. Might make the catchy title for a game show. I wonder if it would catch on...

Helping you live your American dream...

Hi Jules, this definitely makes sense, and will be using this strategy, and passing on to agents in my office.

I'm with you on that strategy Jules. Good stuff, I like how you have taken time to sort this out and have developed a strategy based on how buyers are searching for homes.

Have you done a market analysis to determine if houses sell quicker or at higher values when this approach is used? I would love to hear somebody weigh in on this.

Jules, I have used your previous strategy and many others over 30 years but I think the most important pricing strategy today is to get it priced correctly! A good buyers agent will search a much wider range of prices than in previous markets because we still need to account for the seller who is pricing to add a negotiation buffer or pricing to be the best deal in a particular range.

One of the things I do when researching the market to help my seller set a price is run a "showing report" which will tell me how many showings are occurring in a given range. If the properties priced in the $149,900 range got 20 showings in a week and the ones in the $150,000 range got 50 showings in the week, guess what I will recommend?

Jules we've been doing exactly this for about 3 years now !!!! You'd be amazed at how many experienced agents are stuck in the 000,999 thinking !!!! We're not selling GAS !

Jules, We do the same thing and it seems to be effective in getting as much exposure as possible from both ends of the spectrum. Of course, like others before me have pointed out the key is pricing it right to begin with and even in this market many agents in our area don't do this!! Thanks for a great post.

Interesting stratagy to think about. Thanks for the post.

Patricica AUlson

Makes sense particularly in the MLS

Good Point! Something to think about!

Great blog! I'm going to go change all my listings to $150k, right now. :-) j/k

Point made, and taken. I've often wondered how I need to handle the pricing when it comes to range searching. For the longest time, I referenced Realtor.com's $25k ranges, but many other websites are now in $5-10k price range settings. Our MLS has a setting that says "Range Marketing". I have no idea how that works, but I should look into it.

Great point !!! .......... We all have to put ourselves into the consumer's shoes........

I've argued this exact point before. Internet search engines don't work via psychology. Your listing is either in the range or not. To maximize the potential of being found, price at the break point (100,000; 125,000, 200,000, etc) not slightly above or below it.

Jules, I like your reasoning :) I have always gone after the $249,999. idea but you're spot on when you say that a round number will get results in both searches. Thanks! Maura Sullivan

Jules, an EXCELLENT point. We have been having this discussion in my office, and I used to price the way you do too -- but now I am changing my tune as well! Congrats on the feature!

I used to do what you did - for round numbers just because it's easier.

When I show buyers, a $149,900 house, they would think it's "closer" to the $140K number than they do $150K. In their mind, that's cheaper.

I completely agree with you about the double searches but my experience have thought me to go back to the $149,900 number.

Jules,

Thanks for this simple and useful idea. I plan to use it from now on! As my Mom once told me, "Imitation is the sincerest from of flattery"...so consider yourself "flattered." Thanks!

Our MLS default sorts by price so this strategy would also make your listing show up as either first or last in the search (assuming no others with the same price of course). When you are dealing with searches that returns lots of results the first and last will probably get the most attention.

Jules,

It's hard to believe how many agents don't really understand this concept. It always amazes me when agents will list a property at $249,900 and for another $100, they could have doubled the exposure. I price all my properties at what I call the "price breaks". With the $100s and $50s being the major price breaks and the $25s and $75s being the minor price breaks. It really does pay off in increasing the exposure of our clients properties.

I agree, with all the new ways that clients are looking at properties it seems to better use more rounded out numbers in hope that it will put you in the right area. We can only hope that the customer is looking at our home....lol

Great Post!

Based on this discussion it seems to me that any benefit gained by dropping a list price by $100 to appear "cheaper" to the buyer does not beat being picked up by two sets of search parameters and all of the additional eyeballs that will view the listing. But, as already pointed out the price needs to be at the intersection of MLS searches in your area - for mine that is at every 25K.

Some websites (mine included) only allow searches on preset values. Hence, a house listed at 149,900 would appear in the $125-150K range but not the 150K - 175K range. So, yours is a very valid point for client searches. In my search, I would cover the over and under, but the prospective client may not and would not see the $149,900 property or not know it existed.

I think the key here is the consumer who is setting up their own searches. Most of us when doing this for a client can set our own prices within our agent platforms. But the do-it-yourselfer has some limitations depending upon where they're looking. Hopefully the trainers out there will read this helpful hint.

I had retail stores for 16 years before I got into real estate, so I had that $99.95 mentality. It has taken me many years toi change. I came to a conclusion without scientific proof, that when people saw $149,995 they thought they were being played with and deceived about pricing. I have had a few people say that to me, but what I worried about is the people who started out with a negative attitude.

It can get confusing trying to decide which method to use to price, since there are advantages to each. Running a showing report and looking at similarly priced listings helps a lot.

Cheers,

Robin

I don't know about your market, but in Miami buyers don't make offers based on the listing price. They ask for comps and look at the appraised value. Usually, the offer is lower than appraised value, in part to make sure that the banks will fund the transaction.

This is a great thought. I will pass it along to my realtor partners.

Jules,

You make a good point. Lenders qualify in ranges, search engines deliver homes inprice ranges and the buyers seek homes in specific ranges. Why not appeal to two sets of ranges...no brainer.

Great thought. I must admit my clients have been asking for the $900 at the end of their price. I will suggest this to them from now on.

It's amazing how well this works...It's also amazing that so many agents won't educate their buyers for fear of upsetting them. Who's the "Expert", here? If I consistently used the strategy of listening to clients' words instead of doing my fiduciary duty and analyzing the whole picture, I'd NEVER sell any homes!

This a great point! It's a small detail that differentiates from the competition and I personally experienced that in listings that I got. Thank you for reminding us!

Makes complete sense. No more $XXX,900 listings I hope!

Another good point for me to remember. Thanks

Great blog. Thanks for the helpful tip!

The point is getting the house to pop up as much as possible in the search results. Buyers and myself are normally rounding or dropping numbers (149,900 vs 149). So I pay attention to these pricing points, just as I make sure the important features of a home are also correctly noted.

This is a great point to bring up with sellers as most are in the ,999 mentality that works for used cars but isn't really a player for houses. Everyone I've talked to readily accepted my point and priced with these pricepoints in mind.

It doesn't work everytime because we might have to price it at 265 when the range is 250-275.

Bottomline is getting the house to show up as much as possible in our searches and buyer searches.

Jules. Thanks for putting it out there. I've been using this strategy for years now and when I present it to sellers, they always say, "that makes a lot of sense."

Good stratagey, makes sense. Thanks for getting this out to us at AR.

Patricia Aulson/portsmouth nh homes

I worked primarily as a Buyers' Agent for 8 of my 11 years in real estate and I always searched for my Buyers in even increments. $100 - 150K, $150 - 200K. So as a listing agent I have been doing the same thing and totally agree that using the even number can get you double the exposure in many instances where you fall on those cut off parameters. Great tip!

Well you certainly touched a nerve and made excellent sense. However in this market and with the continual bad news, regardless of how properties are priced, buyers are making some incredibly low ball offers.

Good strategy! I always end my listing price with the number 37...the year my mom was born. I find that in a sea of 00's mine stands out on a list of listings! Great post and makes you think!

Jeani

Yes! I have been using that concept for years. It never makes sense to me that an agent will list a house for 151,900. They miss out on so many buyers looking up to 150k. I listed a house once for $225,000 which I thought was I little too high. There was a much better house in the area for $229,900. My house sold within 3 weeks and I had 3 offers in the middle of winter,2008. The other house was on the market for months and NEVER SOLD even when they dropped the price to $205,000 (TOO LATE)!

Hmmm, makes you wonder if the 99c store could be adding 1% to their profit by charging $1.00. :-) I think you are on to something!

Richdard

I have used that method successfully for 4 years. Makes all the sense in the world.

propic

I'm a believer in the "simple" numbers too. All zero's on the end make sense for the search engines. What about the thought of someone who wants to sell for $227,000 instead of capturing more potential buyers at $225,000? Catch two price point instead of pushing yourself to the low end of one price range. Most buyers qualify by $25k ranges...ever notice that in your market?

Great post! Such a simple strategy - I plan to implement immediately.

Sound logic and a great tip. Thanks.

I like it. When I write an offer on a home I also ignore the "900" at the end. If I'm selling I always try to get that in but I think your strategy is very sound. I'm making the adjustment today! Having a listing show up in both the top and the bottom of a price range will give it double the exposure. Thanks!

Good thought Jules. There are some crazy numbers out there on the MLS and I like the simplified and logic ideas of this post!

I too have fallen into the $xxx,900.00 pricing marketing...but what you say makes much more sense.

That actually makes a lot of sense. I tend to leave of the last $ 900 but I might just round up next time and try to capture both price ranges.

Jules,

This does make sense. When I set up ranges for my clients, I always go 10 % on the high and low end to make sure we don't miss anything, but consumers do tend to think in round numbers.

I had rather show up twice as often than not at all! Great post.

This is an interesting market to be pricing in. I, too, try to position my listing so it picks up the most searches. At 150,000 your lisitng is still at the top end of the 140 to 150 search but you have picked up the 150 to 160 crowd. Very smart. I have noticed lately a lot of prices ending in xxx250 or xxx156. or other such odd numbers That tells me that the seller is getting desperate to sell but is unwilling to really reduce his property to meet the market price. Thoes are the ones I tell my buyers to hold out on for the best deal.

Jules, Tasty food for thought. I have a slightly different position though. I don't list that many homes - working primarily with buyers.

While the amount of an opening offer is certainly the decision of the buyer, as his advocate I give him tremendous amount of input about where to decide to start.

In my counselling with the buyer when preparing an offer, the first thing we do is completely ignore the listing price. List price, is, in my opinion, like the window sticker on a car. The purpose of a list price is to get people's attention - to increase showings. The value of a house is the value of a house.

I prepare a CMA on the subject property before we make an offer. Not in the sense of putting a cool, glossy presentation as I would to acquire a listing but I do all the comps in great detail. I put them all into a spreadsheet showing solds, actives, expireds of any homes that might give us a basis to price the home properly.

By the time we make an offer, we are going in with a number that is within a reasonable range of the market value. Sometimes we'll be very close to asking price and sometimes we'll be well below. If we have to make an offer that is well below, I always send my analysis to the listing agent, explaining that we are not "low balling" as a tool to try and "steal" the house. I explain, in a cover letter, that we really like the house, would like to buy it, but "based on the current comps" our offer is a good, strong offer.

If the house is priced within a few points of market value, I don't believe the offers will be impacted by moving the asking price north or south of a pricing band in a drop down menu.

If you do get a low offer - regardless of the reason - it's still an offer. When I do have listings, I'm thrilled to have ANY offer - low or not. I have the ammunition to support our price and hopefully change the buyer's mind if the offer is too low.

As the listing agent, if the house is priced well, you should be able to, through the buyer's agent, show the buyer your set of facts that support why their offer is too low.

So while I think there is certainly some strategic value in carefully analyzing the list price to fit within the search options of various engines, I think the analysis should be focused on putting the number where it will attract the most lookers. To spend too much time thinking about whether going in one price band or another will affect the offers, is, to me, overthinking things a bit.

Just some differing food for thought.

nice post, will keep this in mind. thanks for sharing!

www.charlottelakewyliehomes.com

Plus you would think that the Seller would enjoy having their home at 150k instead of 149k as it just seems like a BIGGER number. Definitely a few benefits to this one.

I've used this off and on over the years, it's a good strategy--if the house fits conveniently into the breakpoint.

I understand where you are coming from and I agree with you to a certain extent. But buyers are weird when I search for homes I always search a little beyond the given price range.

Many Asian buyers view 8 as a lucky number and you see some homes priced with lots of 8's in the price. As a Realtor I am not advocating any kind of discrimination. Just pointing out a fact I see in the market.

Jules, interesting post, but not sure we fully agree. While we do agree that setting the price at an even number will get the listing in front of more eyeballs, we don't necessarily think this is what will get the house sold, or even looked at. Pricing the house correctly in the first place is what will bring potential buyers to the door. Also, we have seen no evidence that using this strategy will prevent low offers. A buyer will make their offer on many factors: location, condition, features, their financial position, and also on what other comparable homes have sold for, but not on where the home's price shows up in a search range. In our area, we've found that buyers feel that home prices have yet to hit bottom and are still trying to get a deal (or a steal), and have seen many low-ball offers on homes that we feel have been priced well, despite our advice to the contrary. We're pretty sure that having the home show in the lower end of the search results would not have changed that fact. If anyone has seen this strategy prevent lower offers, we'd be interested to hear it.

Remember, this is OUR experience in OUR area, so don't shoot us for having dissenting opinion! :-)

Good stuff!

Good point. I'll have to think about that one next time.

I hear what you are saying, but I am not sure I agree. First of all, I search a little bit higher for my clients because all prices are negotiable and I never put a lower limit on the search. And I think when buyers search on their own, they search more then 1 price range. We really have to think this out thoroughly before we change what we are doing.

Jules, nice point you are making. I'll have to review all my listings and see if adjusting the price would create more viewings and sales. Ed Hopper, Realty Pros & Associates, Ormond Beach, Fl.

In a market where such close searching is not mandatory and the buyers are given the opportunity to negotiate so widely in this region, I always search higher tiers. Recently I saw a $1.2 sell for $850,000, typical of the severe market conditions throughout Western North Carolina. Bargains are here, pricing is somewhat difficult and buyers rule. Oh, send some buyers...

Hi Jules,

This is so true - I always tell my Sellers that you have to price your property the way people search for homes to get the maximum benefit! - Prices are always negotiated down these days so many people are looking at higher prices knowing that they will end up with a home for less anyway. Also as buyers have the mindset of bargain hunting and getting a good deal when the price is negotiated it makes a lot of sense.

Jules,

Good thinking! Hit 2 price ranges for the "price" of one!

Kathy Opatka

Hi Jules. That would work with some prices.

Jules,

Great post,

Jules, this is an interesting pricing stratgy. The right price is essential when selling a home, and, as you explained, the difference of $1,000 can have a big impact on capturing a buyer's attention. I still believe in rounding down in pricing since a buyer perceives that as a better deal, but you bring up a good point. I do wonder which is more effective.

I have been doing this for years, just because I know how I search for my buyers. Our local MLS makes it even easier to enter round numbers - we can check a button and all prices entered will appear in full 1,000s - no need to type in any funky numbers at the end!

I like it! Showing up on both ends of the spectrum does sound like a great way to go! Thanks for sharing!

Interesting point. OF course it's a crapshoot as to whether you can anticipate the price range search of a buyer, but it does sound like there is a sweet spot there that may be worth considering when pricing the listing. Of course where i live, the only properties under 150K are hotel rooms. LOL

I definitely agree with you on this point, and I often take it one step further. I always try to round my listing prices to the nearest $25K. I do this because people often define their searches in this size increment. I've even found that sometimes raising a price from something like $490K or $485K to $500K actually creates more activity. When I explain this strategy to my clients, it also helps to when we need to have a price reduction. Often clients want to lower a $500K house to $490K, but that isn't really a meaningful move in this range. I'm often able to get to at least $475K because it fits with the pricing strategy that we've already agreed on when originally listing.

Sounds like a great idea to increase exposure & getting the house sold!

You are right, as your chance of getting an offer is increased if your property ends up being the lowest asking price within a certain price range.

Hi Jules,

As with most good ideas this is simply brilliant! I'm going to implement it with my next listing. Thanks...

Nice insight Jules. This really goes to show yet another way that new technology is changing the way we do business. Our services must evolve with the times!

We started to do this late last year and it works. Majority of buyers search on the internet first. Go online and search for your house and see how it comes up. We have to think like the buyer when deciding how to market our properties.

I think this makes sense but I have a different theory. Personally when I am looking for a home for one of my buyers I don't put a minimum price only a maximum price and all the other criteria they want. Then I arrange the homes by price from the least to the most. Because I think many buyers do the same I think it is important to be on the first page of the search results so I price ending in 895 instead of 900. Then I get on top of all the other listings that end in 900 for only a $5 difference. Plus "they say" that buyers view odd numbers like 895 as being less than an even number even if the number was 800. If you put in a minimum price you could be missing out on a really good foreclosure or other deal. I definitely see your point though and now I don't know which is better.

Thanks for reinforcing pricing strategy for a wired world.

Lee

Thats genious, i've never thought of it that way.

This has worked successfully for me for several years. When one explains to sellers that buyers searching do so in blocks and then shows the sellers the break points, they understand and appreciate the perceptiveness of the agent.. Sellers then see their agent as increasing the pool of potential buyers--a win-win.

Besides, when shopping for smaller items, don't we round up, in our minds, $4.99 and say that the item is $5.00? Surely we don't think that someone buying the most expensive purchase in their lifetime doesn't do the same!!!!!!! What's $500.00, $100.00 or, heaven forbid, $1.00 against such a purchase?

AUG

Jules,

I've been doing this is the home fits. However, it seems that the people who are in the 150-160 range who look at a $149,000 house aren't interested. Makes the seller happy to have the activity though.

That was definitely something of an aha moment I had when I learned that a few years ago...that price strategy wasn't something I had thought of...but a great idea to use.

Thanks for the great advice. It is important to think about how people search for properties.

Brad

Just another me too! Great point.

This isn't new folks, just another way to market your listings. Sorry don't agree. I forgot who used to teach this tactic/strategy and it didn't hold up with search statistics. Go try and change the price for a gallon of gas.

Lyn, Thank you for your reply. I never claimed that this was a new or unique approach to pricing. For me, this is a good way to get a little bit more exposure and possibly pick up a buyer faster. My common sense says that whether you hunt high for your client (in a search), by simply using round numbers you are more likely to show up in more search results. As a consumer I also think this applies too as almost all web searches ask for a range (ending in round numbers). Thanks again for your comment.

Thanks for your post. I have been teaching this point to new agents for a few years. The use of this technique is, of course, for usee when the market analysis shows the asking price near the breaking point. I find myself using round numbers in searching the MLS for properties to show buyers, as well

AUG

Great point Jules. I will have to keep this point in mind

This has got to be the most simple yet brilliant post I've read to date on AR. I am going to implement immediately. Thanks!

Point well taken Julian. Thanks for the advise-

AUG

Around here, agents tend to be pricing 10-20% BELOW market value. That brings in multiple offers above the asking price though Im sure there are some disappointed buyers who see that price and thing they can actually buy it at list!

AUG

We just recently changed our pricing strategy as well for the exact same reason, I think it will provide more exposure for the listing.

Great advice! I will definitely give it a try.

AUG

Pricing is so interesting. We have an agent in our area who will list a home at, say, $1,234,321 or $987,789 She didn't always do this. Don't you wonder how that got started?

AUG

Good tip. Thanks for sharing!

SEP

I like the reasoning for your pricing.

SEP

Wow! I never thought of it like that. Good post Jules!!

SEP

Nice! I never thought about it like this either! Thanks!

SEP

Anytime you have a listing whose price will fall into two search criteria - go for it! It would be crazy not too.

SEP

Jules

VRM or "value range marketing" is also a popular way to allow the open market to start bidding and let the games begin! Pricing between $145,000 -$169,000 says a Seller will entertain offers in this range. A search of $150K will bring this listing up.The Seller has just used one of the oldest strategies to get the best price: the open marketplace.

OCT

Jules

Thanks, good information to know.
Thanks for sharing the website.

NOV

In this market what ever we can do to help sell a property is a plus. Also I beleive that what ever stategy you decide to do in pricing if you believe in it and sell it it will work. We have tried several most of them discussed here. We are using the Walmart approach now but may revert back to the odd numbers in the new year. It definately gets attention and sets our sellers price apart from the other listings.

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