There are quite a few factors that go into deciding on the price of the home that many home sellers do not stop to consider. Especially with bay area home prices, which can fluctuate greatly. Here are some tips to help you discover what goes into pricing a house, so you can get the most money when you are ready to go to market.
The “99” Strategy
Much like in retail, real estate will employ what is known as the “99” strategy. This is the strategy in which a seller will price a home ending in the number “99” rather than going up to the zero number. Sure, they will lose a thousand give or take with this strategy, but it might affect in the long run.
When determining a home’s price, the seller must also consider the psychology behind the situation. When a seller and real estate meet, they will initially agree on the approximate value of the property. For example, they may study similar homes in the neighborhood and arrive at the cost of $400,000.
The next step in the process is to determine the range for the listing price. This could be somewhere between $420,000 and $380,000. This was determined by studying similar properties and the market conditions at the time of sale. Once you have the price range established, it is time to commit to a final selling price. By employing the “99” strategy, it instills a feeling of finality and confidence in the buyer and leaves less room for negotiation.
Generate Interest in Your Home
Sometimes, sellers use an effective strategy of creating a “herd mentality,” so to speak. Sellers might decide to price their homes a bit below average. This could pique interest in the property and create not only a lot of foot traffic but a potential bidding war, which will drive up the final price. If you are trying to sell a home quickly, this is an excellent tactic to try first.
Price your Home to Be Found
Many buyers have a particular idea of their price range and how many bedrooms they want, right off the bat. Their broker may then conduct a search using their criteria in their local database that will generate all the properties that meet their requirements.
If your home is priced higher than what their range is, the search won’t pick up on it. Even if the price is relatively close, you may miss out on a whole segment of buyers who only aren’t seeing the property listed.
This scenario happens quite often; however, it can easily be avoided. If your agent is savvy enough, they will search for homes that are just outside of the buyer’s price range. It is common to ask a seller to come down to meet a buyer’s price range, but that deal would have never been on the table if the house never showed up in the search.
Talk to your broker and decide on the price that will get the most number of hits in the database.
Don’t Complicate Your Price
Many times, sellers think getting creative with their asking price is an excellent way to help them stand out. A home might be valued at between $650K and $700K, and a seller might list the house at $678,777.
This highly specific number calls attention to itself for all the wrong reasons. Buyers will rack their brains, trying to figure out how the seller arrived at that number. From there they lose their train of thought, thinking about who this seller could be and so one.
The best way to sell a house is to place the seller in the background as much as possible. That is why you depersonalize a home before selling it. When buyers get too invested in a seller, it is easy to derail the deal.
Don’t Be Afraid of Discussion
Finally, it is generally a good idea to listen to and follow your realtor’s ideas or pricing strategies. However, this does not mean you shouldn’t discuss with them the details of what is going on.
Pricing isn’t something that you decide on and never think about again. It will be an ongoing discussion in the buying process. If you aren’t flexible, you may lose a sale. You also have to be ready to change with the market conditions, which are often unpredictable.