Pricing is one of the most crucial elements of selling your home. Some call it "positioning" on the market. Where is your house positioned on the shelf next to similarly priced homes? Quite crucial to the time it will stay on the shelf (market) obviously.
This is one of the most difficult parts of the job for an agent. First, doing a proper CMA or Comparative Market Analysis to choose the best range of prices for the home, and then narrowing it to the BEST price and lastly convincing the Seller of this.
I don't want to go into the dynamics of how the higher price may in fact lower your end contract price as it is lengthy and a conversation I generally only like to have except as necessary!
I want to discuss odd-even pricing. This is a basic business concept that has proven true in pretty much every single industry. From candy bars to Real Estate you'll see it.
Odd-Even Pricing is what is going on when you see a candy bar for $0.89. It's really about $0.90 right? Shaving that one penny off reveals a huge return on a typical economic analysis of buyers and what is called "price elasticity". This concept measures the percentage increase in demand for product x given price drop of unit Y essentially. This is the methodology behind odd-even pricing.
Now with Real Estate, I have also found it is true. I didn't used to think so, but a buyer mentioned once to me that houses without the "3 zeros" in the price always seemed to catch his eye more. Now I have a business and economics degree and know all about odd-even pricing but really originally felt it didn't really apply to such high dollar items.
I gave it some more thought and tests and changed my mind, I think it does matter, a lot.
For example. Recently I obtained a listing right next to a house that was already listed. The house next door was listed at $370,000. My seller thought his/her house should be listed around $390,000. But my seller only wanted about $375,000. The market analysis suggested it would be worth $365,000-$375,000. But my motivation for convincing him/her to price just below $380,000 was the house next door. I knew what his/her needs and desires were, so my hope was to get that maximum amount within the possible price range (appraisable value). So I convinced him/her to odd-even price in the $370's. We priced it at $379,600 and it worked: The house next door sold my listing I believe. They appeared to be priced about the same ($370k). Yet my listing looked like it was worth $20,000 more to me, thus a "bargain" compared to the one next door. My listing sold in 3 weeks very close to the list price. The one next door, is STILL on the market and has since dropped in price. While I won't speculate why the one next door hasn't sold, I will attest that it was wise to USE it when pricing mine, crucial perhaps.
Every number is important in pricing and I would make one other point about positioning: When looking at closed sales, we are considering appraisable value. Within that range, we now should look at actives (houses for sale on the market) for the sake of POSITIONING on the market. When we do this, we should look at ALL types of houses in that price range, why? Because the buyer sure will. So on closed (recently SOLD) comparables, one should of course look at houses just like the one you are pricing. So if it's a bi-level, you better not be considering ranches or 2 story houses, etc.
But, when you look at its positioning, you sure want to consider ALL types of houses because the actives are considered through the BUYER's eyes, NOT the appraiser's. So remember that. If your CMA actives sheet/s only show similar HOUSES instead of similar PRICES, you might be positioning BLINDLY essentially. And that ultimately could cause it to stay on the market much longer, and likely cost you $ in the end.
Be realistic and work with your agent. After all you are likely paying her/him $1,000's for a job you believe they are specialized at, so listen and do what you believe is best. Doing things right from the beginning will make you more money in the end. I dread the words "well, let's just try it at price X" or "We can't go up, but we can always go down".....these phrases are usually famous last words that cost a seller THOUSANDS in the end.
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