Should You Price Your Home Like a Bag of Potato Chips?

By
Education & Training with Tech Training for You!

It's a retail strategy. You know the one...

Let's price the potato chips at $3.99 because psychologically 3 dollars sounds better than 4 dollars (even though it is really being sold for 4 dollars). That works fine for potato chips. However, is that .99 strategy equally as good for selling a house too?

"It's not $600K it is only $599,999" (psychologically in the fives and not in the sixes). Psychologically that may be true but mathematically, and computer technologically speaking, that may be a bad plan.

I have often wondered, but only just now put this kind of thing to the test in the search algorithms.

Do the real estate search sites know this pricing happens and as such do they adjust the search results for buyers?

In other words, if somebody is searching for houses from $600K to $700K, does the search results show the 99 results also (e.g. $599K in the 6 to 7 search).

My test today on realtor.com shows that
it does NOT include the 99er houses in the results.

So if you as seller agent are thinking you are doing your client a service, you may want to rethink that strategy. Why would you want to reduce the eyeballs to your listing? Why not put your price on the EVEN dollar so that it shows for both the higher and lower bracket searches.

I realize we are living in times where sellers market exists (aka buyer frenzy). But still this practice would exclude half the eyeballs and these are the eyeballs that have more money in their pockets. Wouldn't these be the ones able to bid higher? Just saying...

I have not tested all the search sites so I don't know how this works across the board. However, it is something that you should be aware of.

Because we don't buy potato chips after searching between ranges of min and max prices, it's okay to keep pricing them the way we do. But houses, perhaps this kind of pricing strategy is not a great idea!

Let me know in the comments what your practice is and what you've seen in this regard. 

Posted by

Craig Daniels
This blog is all about technology and helping you to use it smarter! Your digital footprint is your chance to attract new clients. What kind of impression are you making via your website, blog, and social media? We’ll be talking about that! Are you as productive as you can be? What apps might help you out? Do you know how to use all the best tools inside the apps? I enjoy photography and videography, you can expect to see those topics also on this blog.
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Comments (33)

Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker, eXp Realty - Kalispell, MT
Helping your Montana dreams take root

I use an even number, no "99s". For exactly the reason you mention - I want everyone to see it.

I remember in my NY MLS there was an agent who priced her homes in a palindrome (aside note, why isn't the word palindrome spelled as a palindrome?). Anyway, she would price it something like 814418 or 137731. They seemed to stay on the market a long time.

Mar 13, 2021 05:05 AM
Craig Daniels

maybe we should call it a palinnilap :) thanks for sharing the thoughts Kat :)

Mar 13, 2021 08:09 AM
Marie Story
Coldwell Banker - Pinecrest (Miami) - Pinecrest, FL
Broker Associate, Pinecrest (Miami) Specialist

Couldn't agree with you more Craig!  I've been explaining this to agents and Sellers for years.  I say "we're not selling socks at Walmart". 

 

Mar 13, 2021 05:49 AM
Craig Daniels

do they still have the blue light specials? oh wait that was the other place ;) thanks Marie for the feedback!

Mar 13, 2021 08:11 AM
John Marshall - FORE!
LoKation Real Estate - Cherry Hills Village, CO
Specializing in Golf Course Properties

Craig,

I could not agree more and I have written about this several times myself and train agents on properly marketing their homes (Retail Pricing .99 vs Real estate Pricing 100) .

Here is the biggest reason for not using retail pricing - (snipped from my agent training manual)

It not only keeps those buyers from ever seeing it, but the buyers that do see it will typically offer less because it is at the top of their price range, they are searching $450-500K so they will try to get the price down a little, however those that might find it if it is listed at $500K and are searching $500-550K, they are more likely to pay the full asking price because it is at the bottom of their price range. 

Mar 13, 2021 05:51 AM
Craig Daniels

Thanks John for confirming that point. I was trying to make that argument as well. By 99ing the price you are seeing the people hitting the top of their range and missing the people who are easily on the upper side. excellent confirmation, thanks!

Mar 13, 2021 08:14 AM
Adam Feinberg
Elegran - Manhattan, NY
NYC Condo, Co-op, and Townhouse specialist

I fully agree and have taken this approach myself. Retail pricing strategies work in a store, but use of a search engine requires a different approach. I am amazed at how few agents recognize this. So many agents are conditioned to think in conventional terms- but it's time to upend this practice.

Mar 13, 2021 06:36 AM
Craig Daniels

Yes. We work so hard on SEO for our websites and blog posts. Should we then throw out logic when doing all we can to get search results on home searches? no!

Mar 13, 2021 08:15 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Craig,

I agree with you! Taking in consideration the search functions buyers use only makes sense to list a home at the even price on $500,000, $600,000, $550,000, $650,000 but the law of the 9's can come into play at $559,900, $569,900, $579,900 or $589,900 just NOT on $599,900.

Mar 13, 2021 06:44 AM
Craig Daniels

That's interesting Dorie and I agree that a couple of 9's could be used effectively if you are safely away from the common cut points on the search min-max range. Good to consider when this might be advantageous!

Mar 13, 2021 08:17 AM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

In my market, I see a LOT of $X,XXX,888 - because those 8's are supposed to be lucky.

I understand the computer algorithm yet in some markets and some minds people will search higher to find what they are looking for.

In my market, homes are selling for $400,000 to $800,000 over the list (not listed low) so those trailing numbers do not matter. 

Mar 13, 2021 07:30 AM
Craig Daniels

We are in NOT normal times, right? And different tiers of  price points will have smaller or larger nets thrown (larger the net, the less the little price 99s or 88s will matter). But when there is more inventory out there again and the price ranges tighten up, these are good things to factor in. Thanks for the observations KD!

Mar 13, 2021 08:22 AM
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Used to use the 9's, no longer. Makes better sense, as Dorie states, to list at even numbers. 

Mar 13, 2021 07:53 AM
Craig Daniels

smarter numbers mean more people viewing! use every advantage :)

Mar 13, 2021 08:32 AM
Paula McDonald, Ph.D.
Beam & Branch Realty - Granbury, TX
Granbury, TX 936-203-0279

Good points for sure. Right now here in North Texas, we don't even have time to really think through much as it seems no matter what, everything is selling very quickly.

Mar 13, 2021 09:00 AM
Craig Daniels

these are truly unprecedented times! nothing normal at the moment

Mar 13, 2021 01:50 PM
AndreaBFerreira CRS - SRS - CLHMS
Keyes Co. - Davie, FL
Miami Dade, Broward and Palm Beach County in FL

Interesting to know... I haven’t tough about that on Realtor.com . Thank you

Mar 13, 2021 11:49 AM
Craig Daniels

glad that it has become something to be aware of and factored in :)

Mar 13, 2021 01:51 PM
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

I agree. Pricing with a "99" will cause you to miss a lot of "eyes."

Mar 13, 2021 01:54 PM
Craig Daniels

our internet training teaches us to get all the "eyes" we can, aye?

Mar 14, 2021 10:28 AM
Rocky Dickerson
Realty One Group - Las Vegas, NV
Superior Service!

Hey there Craig. You may very well be right, I used that strategy to my advantage when we used MLS books, but perhaps these days a different twist is in order

Mar 13, 2021 03:45 PM
Craig Daniels

got to keep up with the kids Rocky. these young'uns have different ways :)

Mar 14, 2021 10:29 AM
Andrea Bedard
Thompson Company, REALTORS® 240.593.2860 - Silver Spring, MD
Fluent in German and Real Estate * M.A. ABR ASP

The answer is "no" Craig :)

I most definitely agree, sellers shouldn't price their homes like a bag of potatoe chips. More and more of my sellers are also questioning this strategy: what's the point? Do buyers actually think that $499,999 is much less than $500,000? and prefer to have a nice, clean number. 

You also make an excellent argument. We don't usually search in a 399,999 to 499,999 price range! 

Mar 13, 2021 07:21 PM
Craig Daniels

thanks for the confirmation Andrea! :) Your clients may not search the nines but as agents helping your clients (as mentioned in this feed) you pros know to extend the search picking up the listings that would otherwise be missed so you can share these too!

Mar 14, 2021 10:30 AM
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Craig I always have to smile  this is such an American tradition about .99 the rest of the world always laughs about this phenomenon but let's be clear we live in the US of A so let's do what is good for us... on the other hand I have many Asian clients and they like the number 8888 since that is lucky for them so what do you suggest?:) my take is go with the flow thanks to Redfin and Zillow they see everything anyway. Endre

Mar 13, 2021 11:01 PM
Craig Daniels

My quick search only put realtor.com to the test. I still wonder if the other big sites/IDX feeds know to show the margin finds as well. Not sure. Meanwhile the 8s are another cultural real thing to content with. You may suggest they might consider the reasons why 0s might make them happier with the results. This is why they hire a professional to help them, no?

Mar 14, 2021 10:35 AM
Sheri Sperry - MCNE®

Hi Endre, 


As a former Californian,  you bring up a very worthwhile point, especially if the market is predominantly Asian.  This is when we have to consider how important we think this is to our client.  You know your market the best

Mar 21, 2021 09:01 AM
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

This is a great perspective to share.

Many listing agents limit the exposure of their listings.

Mar 14, 2021 06:56 AM
Craig Daniels

thanks Roy - we need to work with how technology is programmed to process the data

Mar 14, 2021 10:36 AM
Dorte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Craig,

So true for the past ten plus years for sure. Kinda silly to price it a dollar less for the psychology of it, because hardly anyone is fooled by it anymore, if they ever were.

Mar 15, 2021 05:12 PM
Chris Ivy
Ivy Vine Investments - Memphis, TN
Sell Your House Fast For Cash In Memphis Tennessee

Interesting and well said at the same time Craig.   I like your below quote.

 

Why would you want to reduce the eyeballs to your listing? Why not put your price on the EVEN dollarso that it shows for both the higher and lower bracket searches.

Mar 16, 2021 02:01 PM
Raymond Henson, eXp Realty
eXp Realty of California, Inc. (lic. #01878277) - Elk Grove, CA
Realtor

One of my brokers and I just had this conversation and he pointed out the same thing.  Even though I like potato chips I will price at even numbers.  If I represent buyers and they tell me a range of $600k to $700k, I try to set the range from $575k to $725k to catch homes that are on the fringe that may work for them as well.  Maybe that $725k home has been on the market 60 days and is just about ready to drop the price.  Who knows?  Thank you for the thoughtful post.

Mar 17, 2021 05:27 AM
Scott Seaton Jr. Bourbonnais Kankakee IL Home Inspector
SLS Home Inspections-Bradley Bourbonnais Kankakee Manteno - Bourbonnais, IL
The Home Inspector With a Heart!

Having worked in retail a long time ago, we had our loss leaders in every ad. Just get 'em into the store. With business models so different now than in the golden brick and mortar days, the 99'er pricing mentality makes no sense at all. 

Mar 17, 2021 08:15 AM
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Craig,

This is a great discussion.  It does require being savvy of how the algorithms work.  I try to stay away from using the term pricing and prefer to use the term positioning.  It also helps when discussing "repositioning" the property if it is not getting offers.  I completely agree that one should consider positioning the home using even numbers in the price point you think the property will sell.  If the property does not get offers in that price point, it is time to reposition it in a different bracket at an even number to take advantage of buyers in that bracket.  

Mar 21, 2021 09:09 AM
Mark Don McInnes, Sandpoint
Sandpoint Realty LLC - Sandpoint, ID
North Idaho Real Estate - 208-255.6227

Good information here.  I have long used the 'zero's'.  You get picked up in both searches.  600 to 700 and 700 to 800.   Most don't appreciate the fact.  Thank you for the post.  Mark

Apr 11, 2021 11:00 AM