3 Tricks for Finding the Perfect Asking Price
Determining the perfect asking price involves psychological reasons as much as practical reasons, The Wall Street Journal reports.
“When you set a list price, you’re sending a signal to the market,” says Michael Seiler, professor of real estate and finance at The College of William & Mary in Williamsburg, Va.
But pricing a home can be a “delicate balance,” says Mike McCann, a real estate professional with Berkshire Hathaway HomeServices, Fox & Roach in Philadelphia. You have to balance the comparables with sellers’ unrealistic expectations about what their home is really worth. Sellers often want to price a home higher than what the market can bare. On the other hand, some sellers or agents may be tempted to set the asking price low in the hopes of generating a buyer frenzy and quick sale.
What strategy works? Research offers a few insights into setting the right asking price.
- Getting too precise means you won’t budge. Pricing research suggests that setting an exact asking price — such as $795,475 — sends the message to buyers that the price is less negotiable than, say, a round number like $800,000. “Those using precise pricing show confidence in the price,” Seiler says.
- The number nine can be a big influence. Pricing a property at $499,900 rather than $500,000 can subconsciously influence a home buyer. The home “seems way cheaper,” Seiler says. Even if the home winds up selling above the asking price, the buyer will feel like they got a great deal with the initial lower asking price, Seiler says. “The goal is to make it stick in their head that you’re getting a bargain,” Seiler says. “It’s the way our brain looks at numbers.”
- Going low doesn’t always mean a higher selling price. While setting a lower asking price may generate a frenzy of offers, it won’t necessarily translate into a higher sales price. “It creates a havoc that doesn’t serve anyone well,” Rebecca Walter, a real estate professional with Redfin in Portland, Ore., told The Wall Street Journal. The lower price won’t necessarily increase what a buyer will offer, since some buyers may compete in other ways, like paying in all cash or waiving the inspection to produce a quicker sale, Walter says.
Source: “Strategies for Setting a Price for Your Home,” The Wall Street Journal (Aug. 21, 2014)