Study Reveals Best Real Estate Pricing Strategy

Builder  |   August 12, 2016

Set the asking price just below a round number – that’s the best technique for pricing a home for sale, according to new research published in the Journal of Housing Research. Read more: Are Higher Home Prices Spooking Buyers? Researchers found 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. "Our study suggests that by using the just below pricing strategy sellers can price their home slightly higher without driving away potential buyers," says Eli Beracha, one of the study’s author. "As a result, they end up selling their house for more." Indeed, researchers found that such a “just below” pricing strategy yields a selling price that is about 2.5 to 3 percent higher – or $5,000 to $6,000 more – on a $200,000 house compared with a rounded pricing listing strategy. Still, rounded priced homes usually have a shorter time on the market and a lower discount relative to listing price, researchers found. Yet, “sellers’ ability to set higher listing prices for properties using a ‘just below’ pricing strategy outweighs the lower discount and shorter time on the market associated with similar rounded priced strategy homes,” researchers found. "We tested the age-old debate concerning the best technique to price a home when listing it for sale," Seiler says. "We find that using a price just below a round number works best, particularly in connection to the left-most digit in the price. So, $199,000 works better than $200,000."

Source: Builder