Q. Which method should I use to price my house for sale: 1. Round price (such as $200,000); 2. A precise number (such as $203,214); or 3. Just Below price (such as $199,900)?
A. Method 3, based on a recent study's findings.
People tend to think that method 1 might attract more potential buyers, because a $200,000 price will attract buyers who are looking for price ranges $150,000 - $200,000 and $200,000 - $250,000. Or method 2 might do the trick as the precise price figure may raise the curiosity of a potential buyer to find out why the property is priced in such a way.
However, a recent academic study with results published at the Journal of Real Estate Finance and Economics shows that method 3 - just below pricing - could help you sell the property at a higher price.
The study found that for properties with 6 figure price points, what matters are the most left price figures - such as the $199 in $199,900 price, buyers tend to underestimate the price if they see a lower number (e.g. $199 vs. $200).
Knowing this, a seller could price the property about 5% higher, but using the Just Below Pricing method, so the buyer could notice and remember the seemingly lower price. Of course, the buyer will still negotiate the price, but the study found that despite the negotiation, the Just Below Priced properties still are sold 2% higher than they could if they used the Round Pricing method.
So, next time, when you sell your property, price it 5% higher than the market price, and use the "just below pricing" method.
A. Method 3, based on a recent study's findings.
People tend to think that method 1 might attract more potential buyers, because a $200,000 price will attract buyers who are looking for price ranges $150,000 - $200,000 and $200,000 - $250,000. Or method 2 might do the trick as the precise price figure may raise the curiosity of a potential buyer to find out why the property is priced in such a way.
However, a recent academic study with results published at the Journal of Real Estate Finance and Economics shows that method 3 - just below pricing - could help you sell the property at a higher price.
The study found that for properties with 6 figure price points, what matters are the most left price figures - such as the $199 in $199,900 price, buyers tend to underestimate the price if they see a lower number (e.g. $199 vs. $200).
Knowing this, a seller could price the property about 5% higher, but using the Just Below Pricing method, so the buyer could notice and remember the seemingly lower price. Of course, the buyer will still negotiate the price, but the study found that despite the negotiation, the Just Below Priced properties still are sold 2% higher than they could if they used the Round Pricing method.
So, next time, when you sell your property, price it 5% higher than the market price, and use the "just below pricing" method.
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