I wrote this back in April 2006 http://jmacsays.blogspot.com/2006_04_01_archive.htmlReal estate agents price homes like produce in a super market. They go into a listing presentation and they close the deal. Everyone agrees the home is worth $300,000 so the agent suggests that they put it on the market for $299,900. Everyone knows the psychological advantage of slipping under a price point by a penny or a dollar or a hundred dollars or even one thousand dollars. It just makes the price look like a bargin.
Why?
You are not selling grapefruit. You don't put a big sign in the yard "For Sale, ABC Realty, $299,900."
You put the home into the multiple listing service. I have never met an agent that pulled up listings and highlighted all of the "almost" numbers. Agents representing buyers, usually do a search based on what the buyer is qualified to spend. Does anyone ever get an approval letter that states the buyer is approved for $299,900? Does anyone ever get an approval letter that is not in round numbers that always end in 000? I don't think so.
I think you have someone in your office that can spend up to $325,000 and you enter a search with the list price range $300,000 to $325,000. And I know (even with my limited understanding of search engines and bells and whistles in computers), the home that is listed at $299,900 will never appear in that search.
What does this mean JMac?
It means that by listing the home at $299,900 you have precluded a large segment of the buying population from ever seeing your listing. It means that the buyers that would find your property a true bargin (remember $300,000 is at the bottom of their search) will never see your listing. Anyone looking between X and $300,000 will find your listing but it will be at the top rung of their search, and your listing will be competing with what they may deem more affordable homes.
They are not buying grapefruit and their purchase will not initially be swayed by the difference you create using the 999 or 900 in your price. You are just using yesterday's produce pricing mentality and losing traffic to an archaic way of marketing.
Maybe it is time we understood the tools we use and dropped the 9's.
Just a thought.
jmac
Hmm John you do have a good point. Never really thought it about it like that. Thanks for the blog Your Orlando & Lake Mary, Real Estate Expert, Heather Joubran
I never thought of it that way. I typically search from 0 to a bit above what the client is looking for - but I have to admit on the higher end, I may enter in a lower limit.
I find it frustrating when listings are priced at $5,000 to $10,000 above the 000 mark, lets say $205,000. I typically search a bit higher to catch these but I always wonder 1) if my buyers think I'm pushing them higher than they want to go and 2) and how negotiable are the sellers - my experience with listings, is that they tend not to negotiate well. Am I wasting my buyers time?
There is a very funny Long & Foster agent who always had totally waco prices that included her lucky numbers and those of her sellers. So you would see $823,467. I thought that was pretty cool.
JMAC_
i am not sure it will ever change-- there are some things that have been done a certain way and it might take a tsunami to make it change-- i will be more mindful of the price points and who might be just above mine or just below it--
Pat - I've heard of the lucky numbers, branding (xx,400 - for REALTY 400) and such. Don't get me wrong, I like cute, funny and interesting stuff but as professionals we are supposed to come up with a number that reflects the market price of the home. Granted we don't have to get down the pennies, but... Next thing, we'll be playing is "The Price is Right" - put the numbers in the right order...
I agree. In today's "buyers market", maybe we should put "SRP" in front of the asking price. Just another thought.
It's simple pricing psychology...consumers look at prices ending in .99 for example more favorably. It is a perception of savings. It is not logical, nor does it make sense, but it is what consumers are used to. In real estate, I believe it is used to keep the price in the lower band or search range, so as to be seen by more potential purchasers.
J-Mac - not sure I agree with you on this one. If I have a client who tells me "search between $300,000 and $325,000" then in the current market I am carrying out a search from $295,000 to $350,000 - thereby catching all the $299,900 people. There is no doubt that there is a psychological thing going on with it. I am repeatedly having to correct buyers while we are out. "OK, so $299 for this one" - and I will say "no - $300!!".
$101,000 or $201,000 is always a bugger for me, even if the comps support that price. As you go up in price attempting to squeeze that extra grand or couple of grand doesn't seem to make sense.... Good post!
Bob Mitchell
ValueList Real Estate Services, Inc.
Heather - thank you for dropping by. I appreciate that folks take the time to stop and read my blog.
Judi - I appreciate the dilema. I have to believe in what I am doing. I use a broader search range because in my market looking at a higher priced home does not mean that the home will fetch that price. My post is for listing agents. It is good you are looking at both sides of the issue.
Patricia - I think your description of the agent is appropro.
Douglas - Mr. Huxley is not the only one seeing a brave new world.
Lori - Every price in the MLS is a SRP. Our job as a listing agent is to get that and more if possible and our job as a buyers agent is to consider that the sellers best hope.
Kelly - I understand the psychology. My good friends at "the Wiz" used to explain the bigger the nines in the sign, the hotter the item. Pricing in the MLS has little to do with psychology and everything to do with search engine availability. I may have homes priced at $400,000 in the MLS and every flier reads $399,900. Visual things for consumers are not the same as search engine driven criteria.
Simon - You reasoning is sound if every agent is as thorough as you. Your sellers expect you to capture as much traffic as possible. You have to price homes so that even lazy agents can find them.
Bob - Makes me wonder as well. Thanks for stopping by
Why would someone search for a specific range and not $325,00 and under.
The pricing standards are this way for a reason. Autos - appliances - and just about every other commodity is priced with the --999 ending as it works.
Adam - For some reason, you and many appear to have overlooked that computers have been invented. You pose beliefs about face to face marketing as if there has never been a search algorhythm explained to you. Your goal in putting a home in the MLS is to have it seen by as many possible potential buyers and/or buyers agents as possible. Maybe your market is smaller and using the open ended search parameters of "$325,000 and under" would give you a manageable list. In my market, and many markets across the country, such a search criteria would offer greater than 500 homes and only show the first 500.
I have found it is more efficient to use search parameters that narrow my search to no more than 50 homes to review online. I can then go over them and narrow it down to about 25 to send to a client with the instructions to create a top 5, then 6-15, then 16-25. I make arranges to preview any that I have not seen before showing them.
I could never narrow a list of greater than 500 + homes down.
The point of the post was to keep homes available for viewing to the most possible people. Understand the tools that internet users have available to them. There are drop down boxes for selection of price ranges in many of them. There is no valid reason to be cute or pompous and use $399,900 and lose everyone that began their search at an even $400,000. If you lose just one, you have lost too many.
John - if I were a betting man I would tell you that if the Bucs beat Houston on Sunday, they will finish 12 and 4. I would also tell you that if there are two identical homes on a street (and you really have to have them as identical for this one) and one is priced at $299,900 and the other at $300,000, the "cheaper" one will sell first.
Simon - Your statement may or may not be correct. I can promise you that if the buyers agent or the buyers set their search perameters at $300,000 and up, they will never know that the $299,900 exists.
But John - what about the Bucs???? tee hee hee. OK, I will bite on this one. The lazy agent who does not represent their buyer properly will miss my $299,900 listing. You are indeed correct my friend. BUT.... in this market there will be fewer and fewer lazy agents!
Andrew - You are doing it the way agents should be doing it. My post is for listing purposes. Of course, I see the added benefit of buyer's agents realizing that they need to expand their search criteria to take into account the "grapefruit" mentality.
Good thoughts, John. Going to have to consider this more when I put my own condo on the market.
Matthew - Not to worry. Let me list the condo and I will make sure we cover all the bases.
John - to extend the grocery store analogy, you should perhaps visit my blog and read "Let's sell more cheese". I think you;d enjoy it.