When it’s time to sell your house, there a basically three pricing philosophies you can choose from: (1) Overprice to enable you to negotiate down to your real price; (2) Underprice to generate interest and, hopefully, a bidding war; or (3) Price it at what you think it’s worth. Once you’ve made that decision, it’s time to tweak the exact asking price for maximum effectiveness. Yesterday’s article in The Times notes the importance of dropping down to psychologically significant “break points” which seem to occur every $25,000 or so. If, for example, an apartment is really worth $610,000, the article argues, price it at $600,000 so you don’t lose all those people who’ve set $600,000 as their limit; once you’ve got their attention, they can potentially be lured into a bidding war. Likewise, the subconscious impact of the first integer is important enough to go with $599,000 over $600,000. Barbara Fox, the president of Fox Residential Group, recommends a combination of the above strategies: Pick a number that’s slightly below a threshold but a little higher than its market value. Everybody likes to be able to negotiate a little bit, she said. One approach that receives almost universal mockery is the overly-specific price. I’ve seen prices like $433,779, said James Lake, a vice president of Bellmarc Realty. It indicates it’s going to be a difficult transaction from beginning to end. What strategies have worked well for you in the past?
The Psychology of Pricing [NY Times]
Illustration by Douglas B. Jones