Is an outdated pricing strategy resulting in missed opportunities?

January 11, 2010

Rhonda Haran, REALTOR

By Rhonda Haran, REALTOR®, Atlanta Fine Homes Sotheby’s International Realty

A long time ago, the real estate industry adopted what I will call a “retail pricing strategy”. If the market value of a house is, say $800,000, realtors will it list at $799,900. The thinking here is that buyers will perceive the house to cost less, making the home more attractive than if it were priced at $800,000. Psychologically, the theory goes, they’ll automatically think $700k vs. $800k. Let’s consider this strategy for a moment.

First, do we really think we are “tricking” today’s savvy home buyers into believing they are paying so much less? Really?

Second, and most importantly, shouldn’t we consider how much the real estate industry has changed since this practice became the norm?

According to the 2009 NAR “Profile of Home Buyers and Sellers” survey, 90% of all buyers used the Internet to search for homes. 90%! What happens when these home buyers go to the internet to search for a home? One of the first criteria they will plug in to narrow their search is price. Using our example above, let’s say our buyer is searching for a home for around $800,000. Depending on the site the buyer is using, he will either type in a search range (in this case probably $800 – $900k), or select one of the predetermined price bands, typically broken down in 25,000 increments.

So, the listing at $799,000 does not even show up in these searches!

By pricing at an even $800,000 you capture the prospects searching from $800,000 and up, as well as those searching up to $800,000…possibly doubling your opportunity for a buyer!

This strategy applies in all price bands, assuming market value is right at the price break.

Further, since the majority of home buyers work with a real estate agent when purchasing a home, it’s worth noting that agents also typically search in even price bands when using their MLS system. (To my REALTOR® friends, try this strategy using the reverse prospecting system in FMLS and see how many more prospects you’ll have if you list at the even price break.)

This strategy requires a shift in a mindset that has been around for a long time. In today’s challenging market, we need to carefully analyze our strategies to determine that they are most effective.


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