Showcase Showdown (Posted October 17, 2016)

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.