BOULDER – Before you begin discussing your real estate pricing strategy, you should familiarize yourself with a marketing foundational model known as the “marketing mix”. You’ve probably also heard it referred to as the “four Ps”, which includes four major factors that influence a purchase decision. Those four factors are product, promotion, place, and price. In real estate, your home is clearly the product in question, and the placement of that product is already set for you, as well. So, as Realtors marketing homes for sale, we primarily deal in promotion and pricing. The latter, of course, is the single most important consideration when it comes to positioning your home effectively in the marketplace.
Perception is Everything
Strategic pricing is an art form, and there’s a big dash of psychology in there, too. It’s all about perception, and the principle of “99” is a great example of that. Is $499 a bargain compared to $500? Of course it’s not, but studies in pricing cognition have shown that we subconsciously perceive it that way. Surely, you’ve noticed that so many properties have prices that end in 9. Well, now you know why.
Also a matter of perception, there is such a thing as the “herd mentality”. Buyers don’t want to be the only ones interested in a property. In fact, they see it as a little suspicious when they don’t have to compete for your home or they see that a home has been on the market for too long. They wonder if something is wrong with the home.
You can avoid that by strategically pricing your home just slightly lower than you think it should be. It’s a great way to drum up more interest and let buyers compete, and when that happens, you almost always end up with a better offer in your hands.
Resources are More Effective When You Know How to Use Them
Another very important consideration that has surfaced in recent years are the major MLS syndicates, like Realtor.com, Zillow, Trulia, and so on. Buyers do receive listings directly from their agents, but if you’ve ever been on the hunt for the perfect home, then you know how much time can be spent scrolling through these apps. People will spend hours on there at all times of the day and night. Your agent should help you develop a pricing strategy that works well in conjunction with these invaluable promotional tools.
These websites and mobile apps break pricing down into categories that follow a structure that goes something like this:
- Homes up to $850,000
- Homes up to $875,000
- Homes up to $900,000
- Homes up to $925,000
- Homes up to $950,000
Once you hit the $1,000,000 price point, those increments also grow larger. Below $1,000,000, though, it’s easy to see how the difference of just $1,000 can have a huge impact on the number of people who will see your property in their search results. You might be able to double your foot traffic simply by dropping your list price from $876,000 to $874,999. You’re not losing much at all by doing that, so why not just save a step and start with the latter?
This is just the tip of the iceberg. There are several tactics that can be used to appeal to the buyer psyche, and pricing your home should be a collaborative effort between you and your Realtor. An experienced listing agent will tell you exactly how to price your home for a quick, profitable sale, and they’ll be frank with you about what is and what is not realistic when taking your home to market.
By Jennifer Egbert. Jennifer is a Realtor at Porch Light Real Estate Group and specializes in Luxury neighborhoods, home builders and current market conditions. Visit jenniferegbert.com, e-mail [email protected] or call 303.619.3373.