The Psychology of Pricing a Home

By
Real Estate Agent with Keller Williams Realty 0575737

PricesThere's just something about how you price something. With gasoline prices, that little 9/10 of a penny just does make a gallon look a little cheaper doesn't it? With home pricing it turns out now there is a bit of psychology behind that too.

REALTORS and sellers try to offer prices on their homes near market value most of the time with a little 3% wiggle room on the top side. I've heard that realistically homes are selling for 93 to 95% of asking these days.

But what about the FORMAT of the price? A report out by Cornell University says all zeroes at the end of the price does not sell as well as a specific price. Don't set it at $326,000 but rather $325, 425 for a faster sale. Does this make sense? Having three zeroes they say lowered the sales price by 0.73 percent. The house with the more "precise" list price will sell for more the study says. Online firm Redfin said the optimum price was ending in $500, such as $391,500. Try it and see if it helps sell more houses. Who knows in today's wacky market?

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Rainer
67,172
Keith Perry
Coldwell Banker - Hiram, GA
REALTOR - West Metro Atlanta

Gary, love the photo. :)

Makes you wonder how they tracked those stats. We often list at ,900

February 20, 2008 05:06 PM #3
Ambassador
1,532,010
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Jane: I always thought maybe rounding to a $900 might help, but these studies like oddball specific prices or something with a $500 in it. Somehow I think the selling of a house is more complex than this.

Chelle: Cool strategy to be in both zones!

February 20, 2008 05:08 PM #4
Rainer
179,089
Kathy Passarette
Creative Home Expressions - Mount Sinai, NY
L.I. Staging/Decorating
Gary ~ Years ago when we sold our first house (1990) our agent suggested a ***,999. price.  I guess it was the same theory. 
February 20, 2008 05:09 PM #5
Rainmaker
639,998
Marchel Peterson
Results Realty - Spring, TX
Spring TX Real Estate E-Pro
Gary, I have done the 139,900 but they are saying I should price at $139,500.  Hey I guess it is worth a try. I've always wondered if that made a difference; thanks for sharing.
February 20, 2008 05:45 PM #6
Rainer
122,360
Laurie Logan
Prudential Community Realty, Broker Associate - Madison, WI
South Central WI Real Estate

The first house I sold had a list price of $94,713.  My buyers thought the sellers must have calculated their necessary net to the dollar.  It was a great price for what the house offered.  My buyers offered $94,720, and got the property.

I later asked the listing agent about the price.  He replied, my sellers wanted their house price to stand out on a list of homes from the MLS, so they ended it with their house number!

February 20, 2008 05:50 PM #7
Rainmaker
123,193
Elaine Hanson
Snyder Sutton Real Estate - Topanga, CA
REALTOR - Topanga, CA Real Estate Agent
Interesting about the ,500 ending.  I think that might sound attractive.  People are way too wise on the ,999 or ,900 endings.  It actually makes me think of a discount chain, not a quality home.
February 20, 2008 05:52 PM #8
Anonymous
Anonymous
Anonymous
Gary:  I use ,000 or ,900 most of the time.  I'll have to try the ,500.   I'll try anything.
February 20, 2008 06:00 PM #9
Rainmaker
107,450
Jill Wente
Better Homes and Gardens Real Estate | Gary Greene, Realtors - Spring, TX
Spring TX Real Estate
Gary: I use 000 or 900 most of the time. I have not tried the 500.  Hmmmm. Would be worth a try.
February 20, 2008 06:21 PM #10
Anonymous
Anonymous
Anonymous
Gary - It sure couldn't hurt to give it a try.  Love the picture.
February 20, 2008 06:29 PM #11
Rainmaker
714,196
Barbara S. Duncan
RE/MAX Advantage - Searcy, AR
CRS, GRI, e-PRO, Searcy AR
We have a few weird ones in our town that price their homes like $95,321  or $175,621.  Have you figured it out?  The cutesy thing is the 21 on the end!  Wonder what ever happened to their gold coats??
February 20, 2008 09:03 PM #12
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Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Keith and Robin: Cornell did some survey over several areas of the country. 

Kathy: Maybe the 999 is to basic for today's sophisticated buyers.

Marchel: I guess we have to experiment and find out.

Laurie: That kind of precision pricing does stand out.

Elaine: We'll all have to try the 500.

Jan: Love it. You'll try anything. A slow market?

Jill: We have another experimenter.

Karen: That gas station sign seems so appropriate in our higher price states.

February 20, 2008 09:05 PM #13
Rainmaker
92,120
Lynn Johnson
Coldwell Banker Home Connection - Owatonna, MN
Owatonna, MN Real Estate
Gary, I love the sign - I don't think I'll be filling up with premium.  I've used ,500 as a compromise when the husband and wife (sellers) can't agree on the list price.  Another agent in our office uses the ,000 theory of catching the buyers searching above and below the price range.  Typically we use the ,900 approach.  We've never studied it, so it was interesting to hear the stats.
February 20, 2008 09:22 PM #14
Rainmaker
388,650
NW Real Estate |Colleen Fischesser & CO Serving Seattle-Tacoma area Since 1990!
RE/MAX Select R.E | Designated Broker/Owner - Renton, WA
Serving Seattle-Tacoma Home Sellers & Buyers since
Gary, love the sign! I've never been a fan of the flat 000 price strategy. I'm going to stick w/ my 950 pricing though, just because I refuse to accept anything those scientists over at Redfin have to say as fact. ;-)
February 20, 2008 09:45 PM #15
Anonymous
Anonymous
Anonymous
Gary~This is so true (my famous words when reading your blog), but really, I had read an article when I first got my license that said to list with an odd number due to the psychological effect that it has on the consumer. They tend to think they are getting a better deal.
February 20, 2008 11:43 PM #16
Rainmaker
332,875
Judy Greenberg
Coldwell Banker Buffalo Grove- 350 Half Day Road - Buffalo Grove, IL
Coldwell Banker - Buffalo Grove - Long Grove Homes

I love the sign .... it says it all!

February 21, 2008 06:59 AM #17
Rainer
35,210
Rob Baldwin
US ECO-GREEN REAL ESTATE INC. - Santa Clarita, CA
REALTOR, Santa Clarita
Hi Gary, I feel those stats are true. When I priced a few homes in the past I have used 498,895 sold for 495,00 and another I did recently was listed at 298,895 and sold at list. Were as when I use zeros at the end of price, it seems it just does not stand out.
February 21, 2008 09:28 AM #18
Ambassador
1,532,010
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth

Lynn: I'll have to try and experiment with the 500 too.

Colleen: 950 is good too.

Julie: Odd numbers are a better deal. Maybe THAT is the secret to selling houses. THANKS!

Judy: I think I need to buy a hybrid vehicle.

Rob: Very cool results for you, I'm glad it worked.

February 21, 2008 02:33 PM #19
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1,248,702
Norma Toering
Charlemagne International Properties - Rancho Palos Verdes, CA
Palos Verdes Homes in Los Angeles Area
Gary - When I was a new agent I was mystified by a successful agent's pricing technique.  Finally, I asked him if he used a particular formula to arrive at those very odd and unpredictable numbers.  He laughed and said he gives the seller a dice to roll for the last three numbers of every list price.  His listings certainly stood out from all those ending with 000 or 999! 
February 21, 2008 04:33 PM #20
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1,532,010
Gary Woltal
Keller Williams Realty - Flower Mound, TX
Assoc. Broker Realtor SFR Dallas Ft. Worth
Norma: I love that dice roll idea. THAT, goes into my next listing presentation for sure. YOU are a genius!
February 22, 2008 06:48 PM #21
Anonymous
Anonymous
Anonymous
Great analogy.
February 22, 2008 08:21 PM #22
Anonymous
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