The
game show “The Price is Right” –
the show where 95% of what they give away is total garbage (fireproof bathmats
in the shape of Ecuador, really?) –
is probably each child’s first exercise in trying to guess how much something
costs. Admit it, you sat glued to the TV
set either screaming at the screen so the contestant could hear you or you were
sending out vibes telepathically –
either way, you KNEW you were the BEST price guesser in the world . . . until the very moment the model would reveal
the real price of $732 for a set of salad tongs made of Lucite and cubic
zirconia (your bid was $17, and you thought THAT was probably a little
high). But that didn’t stop you because
here comes that toaster oven that doubles as a brief case –
how could anyone put a price on THAT?
A
recent study published in the Journal
of Housing Research
(just let the sheer coolness of that name wash over you for a few moments)
concerning pricing was interesting. The
researchers in the study (who, you have to think, are absolute party animals)
concluded that “buyers
are more drawn to a house priced ‘just
below’ at,
say, $199,000 than to a house priced at a rounded number like $200,000.” They provided further nuggets of wisdom by
adding that their study suggested that by using this “just below” strategy,
sellers can price their homes slightly higher without driving away potential
buyers. Compared to a “rounded” pricing
strategy (that means the number has been rounded up from $199K to $200K and not
something involving the feeding of high-calorie foods to fatten it up), the
authors of this study say the “just below” strategy yields a selling price that
is between 2.5 and 3 percent higher. This is solid science, right? I mean, these guys obviously stayed at the
office late crunching numbers and missing their kids’ soccer games to bring us
this stuff, so it must be dead on.
Oddly
enough, in their very next breath, they say that “rounded” priced homes usually
have a shorter time on the market and a lower discount relative to the listing
price. Huh? Didn’t they just say the “just below” pricing
strategy yielded a selling price 2.5-3% higher than a home being marketed with
a “rounded” pricing strategy? So, if the
“rounded” priced homes usually have a shorter time on the market and a lower
discount relative to the listing price, how much higher are the “just below”
folks bumping up their list price so they can turn around and negotiate
downward and leave the house on the market LONGER? That sounds like a lot of work, hassle, and
worry. Wouldn’t it just make more sense
to price the home correctly in the first place?
Okay, now I’m just talking crazy, I know.
At
the end of the article, there were lots of comments about the “just below v.
rounded” debate –
not to be confused with the Kitchen Debate between Krushchev
and Nixon which resulted in the creation of nachos –
and many had good points. However, if I
start listing them here, my head (and possibly yours) might explode. In the interest of keeping my cerebral cortex
attached to the rest of my body, let me just say this: do yourself and favor
and don’t overthink it. There are SO
MANY factors that play into the ultimate sale price of a home that have NOTHING
to do with the first number that went up on the board: demand, timing, what you
(the buyer) may have had for lunch and is threatening to make a reappearance,
etc. Focus your attention on “the deal”
(this goes for both sides of the transaction) and lean on your agent’s
expertise to guide you through this.
Some agents may yell at you to make sure you hear them correctly, and
others will just try to send you a vibe telepathically. Whatever their method of guiding you through
this exciting time may be, try to make sure they get the other party to throw
in the fireproof bathmats in the shape of Ecuador. You’ll never know when you might need them.
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