Pricing Your Home To Win
You may be familiar with the TV game show “The Price is Right.” It’s that game where players try to guess the right prices of merchandise.
When it comes to selling your home, however, you don’t want to play a guessing game. You want to win and price your house right. Why?
Your list price will dictate which pool of buyers will view your property. It will also give buyers an immediate first impression when it comes to the value of your home. Based on the price, buyers may feel the house is overpriced, a bargain, or priced just right.
And, more importantly, your price will influence a buyer’s decision to make an offer. So, how do you know whether your price is right?
Here are 5 ways to determine the best pricing strategy. Take a look:
1. Listen to the market.
Is it a seller’s market or a buyer’s market? How much inventory is available? Are properties receiving multiple offers?
If you find yourself in a seller’s market and multiple bids are the norm, you may want to consider taking advantage of this environment by pitting competing buyers against each other. In fact, by pricing your house slightly below market value, you are likely to produce a bidding war, and hopefully you’ll end up with a number that exceeds your expectations.
2. Listen to the comps.
Buyers will be looking at recent comparable sales when determining how much they are willing to pay for your home.
In turn, you should look at the comparable sales when determining how to price your home. For example, if a similar home on an adjacent street sold for $600,000, it doesn’t make sense to list yours at $700,000.
Here’s something else to consider: Planning for a price drop is typically not an effective marketing strategy. Why? A price reduction weakens your negotiating power. And, when a property lingers on the market, buyers will assume there is something wrong with the house.
3. Avoid awkward pricing.
You may be tempted to put your lucky numbers in your asking price. But, listing your home at an odd number, like $1,512,469, just feels strange and confusing to buyers. Rather, you should stick with an even number, like $1,500,000.
4. Use psychological pricing.
Psychological pricing is a marketing strategy based on the theory that certain prices have a bigger physiological impact on consumers than others. Here are two possibilities:
- Charm Pricing. With this strategy, you can reduce the left digit by one digit. This means pricing your home at $599,000 instead of $600,000. Although buyers intellectually recognize that there is no meaningful difference between the two numbers, the lower number appeals to them on a less conscious level. Physiologically, the first number has the biggest impact.
Prestige Pricing. This pricing method means all numerical values are rounded figures, so instead of pricing at $2,199,000, your price would be $2,200,000.
Charm pricing is often most effective on properties valued under $2,000,0000, while prestige pricing works best with high-end properties.
5. Set your pricing in $20,000 to $25,000 increments.
Why do this? Because home buyers search for properties online and most use increments of $20,000 to $25,000. So, listing your home for $510,000 could prevent your home from being seen by buyers who are searching for a home up to $500,000. And, you don’t want to risk losing this buyer because oftentimes this househunter may be willing to pay more than $500,000 for the right home.
Instead, if may be a better idea to knock your price down by $10,000 to an even $500,000. This way your house might generate more traffic and perhaps lead to a bidding war - pushing the price above your expectations.
Let’s Play the Price is Right
It’s important to remember that there is no certainty in real estate. Your listing price is only part of your marketing strategy. The market conditions and recent comparable sales will also help dictate your selling price. And, at the end of the day, buyers will ultimately decide what they are willing to pay.