Experts don’t recommend setting the asking price for a home too low just to attract more potential buyers who pit an offer on the table; there’s a psychology to home pricing that isn’t easy to figure out, according to the Wall Street Journal.
Mike McCann, a real estate agent with Berkshire Hathaway HomeServices, Fox & Roach in Philadelphia, tells the WSJ that pricing can be “a delicate balance,” as home owners may think their home should sell for more than what’s realistic. Real estate agents might set home prices too high to please their customers – to even land a customer – or they might set them too low for a quick sale, he says.
Getting sellers to start with a realistic asking price is one of agents’ biggest challenges, especially when home owners factor in financial and emotional factors, the WSJ reports.
But significant gaps between the asking and sale price are somewhat uncommon these days, Stan Humphries, chief economist at Zillow, tells the WSJ.
In May, median sale prices were a mere 3 percent below asking prices in 35 metro areas across the U.S., according to a Zillow analysis. And real estate agents report to the National Association of Realtors that only 3 percent of homes sold for less than 23 percent below the asking price in 2013, and only 2 percent of homes sold at 12 percent or more above the asking price, the WSJ reports.
It’s most difficult to price homes without comparable sales data – such as those with historic value, on a unique plot or a one-of-kind design – and often see the widest price gaps, Prof. Seiler tells the WSJ. Neither the agent nor the owner really know what the home is worth without other properties to which to compare it, he says.
Of course, it’s less important to compare prices when few homes in a desirable are available, Humphries says.
While the psychology of pricing is not yet a science, research has found that an exact asking price usually tells buyers that the seller is confident the price and it is less negotiable than a number that ends in ‘0,’ he tells the WSJ.
And a home priced at $999,900 rather than $1 million seems to make buyers think that it’s " way cheaper," according to Seiler. And though a home may sell above the asking price, buyers may still feel like they are getting a bargain because the initial asking price was lower, Humphries says.
Putting a home on the market during a slower time of the year may also trump market price, as it will have less competition and could very well sell above the asking price, the WSJ reports.
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