Harleysville-Lansdale Real Estate and More

Why do buyers and sellers think in terms of $25,000 price increments?  What makes a seller think their house is worth more than one across the street?  Are your clients more emotion based or rational in their approach to pricing?

Buyers:  "I am looking for a house between $375K and $400K."  No one ever says I want a house that is $377K to $408K.

Buyers:  "I am not paying top dollar.  We'll wait for the market to bottom out."  How will you know when the market has bottomed out?

Buyers:  "But the zestimate says it is only worth $364K."  And why do you like this home so much more than anything else you've seen in your price range?

Sellers:  "I won't take a penny less than $400K."  If you tell a seller their house will sell somewhere in the range of $390K to $410K, they seem to get fixated on wanting to sell in the $400K to $410K half of that range.

Sellers:  "I am not giving my house away."  Who ever said that selling for $375K and a profit of $100K is "giving it away"?

Sellers:  "I want to price it higher because a buyer is going to come in $20K - $30K lower anyway."  If you price it that high, no one is even going to look at it.

How do you get clients past the psychological barriers they have created?

As no two homes are identical, pricing a home is a little more complicated than it sounds (otherwise we could just always go with the zestimate).

There are a lot of different pricing strategies out there.  Understanding them and recognizing the type of buyers you are likely to attract may help in deciding how to price a home.  There are four main categories:

Premium Pricing - high quality and high price - this is true value that people are willing to pay for

Economy - low quality and low price - this is for the no-frills people who cannot afford more or don't want to pay more

Penetration - high quality and low price - a true deal if you can find it, deals like this don't last

Skimming - low quality and high price - a raw deal if you fall into it

Then you can couple the basic pricing strategies with other strategies applicable to real estate, which are:

Psychological - emotion based not rational - $299K versus $300K

Geographical - prices vary depending on location - this is inherently built into home prices across the country - location, location, location

Optional Product - a low base price attracts a buyer and then the options inflate the price - common with new construction

Captive Product - in the course of the buying process, a consumer may be required to use a certain title company or mortgage company or use a certain contractor for upgrades - also common with new construction

Product Bundle - if personal property (i.e. appliances, furnishings) is bundled together with the price of the home

There are several other pricing strategies out there but they don't apply well in the sale of real estate (for example, not many homes are Buy One Get One Free).

In this market it is imperative to get our clients past any psychological barriers they have created.  For example, we had a listing that was priced above $300K.  We initially told the seller to expect to sell in the range of $290K to $310K.  First we were listed at $315K and then reduced to $310K.  We had good showing activity but we weren't getting any offers.  The seller was so resistant to dropping to $300K, even though the seller would accept an offer that was in the range of $290K to $300K.  Well we did finally take the price down to $299K and within 48 hours we had an offer that was not quite full price but very close - close enough that we were able to get the home under contract and into escrow.  And why couldn't we have gotten the same offer when we were priced above $300K?

~Lisa

Contact Scott Loper, Associate Broker, Realtor®, RE/MAX Realty Group at 215-513-1333 for help buying or selling a home in Lansdale, Harleysville, Hatfield, Souderton, Skippack, Collegeville, North Wales and the surrounding areas of Montgomery County Pennsylvania. To Search for Homes For Sale in Montgomery County Click Here.

$25,000 - Buyers, Sellers, Psychological Barriers and Pricing Strategies Copyright © 2010, The Scott Loper Team, All rights reserved.