Price breaks, rookie mistakes29th April 2021
You will often see in almost any retail situation “psychological pricing.“
Instead of something costing 1 dollar it will cost 99 cents In most situations, the argument is made that the cost will look less. I mean, obviously it does look less because it is less. But it is supposed to impact the buyer in a way that is actually significant.
This strategy has been tested time and time again. You will see companies reinvent this process by selling things for you $.98 or $.95 or $.94. There has been tons of research on the effectiveness of these strategies and how a penny swing in either direction could change a buyers interest.
Now if we were to extrapolate the importance of pricing on your most valuable asset that you currently own, your home, you would want to also implement this, right?
The biggest differentiating factor with this strategy has to do with marketing. Impacting the potential interested buyers and making sure that you reach ALL those who in fact are interested.
Now, often times when a buyer is working with an agent they set up their property search by price range. For example a buyer might be looking in a price range of 350 to 400. If your home is valued on that price break then your best strategy is to work with even numbers. Reason being is if you try to use this psychological pricing you may price your home one dollar short of someone’s home search. Potentially half of the interested buyers out there.
If you price your home at 350 there’s a good chance that buyers who are looking at homes between 300 and 350 AND 350 and 400 will all see your property. If you decide to price your home at $349,999 then there is a very good chance that none of your high end buyers looking between 350 and 400 will even come across your property. It is a simple, disastrous and rookie mistake when it comes to pricing.
Only should you ever implement psychological pricing when selling real estate if you fall away from price breaks. For example if your home is valued at $330,000 then there probably will not be a negative impact if you list at $329,950.
And don’t take my word for it this is a well studied pricing strategy throughout real e$tate.