Oct 14, 2017
The whole psychology behind pricing is one of the most fascinating things. We believe that an IPad priced at £499 feels like a better deal than £500, although there is only £1 difference, which isn’t going to make (if any) difference what so ever. But retailers have long priced products just below a round number for this very same reason and its worked wonders.
When selling houses, the ‘99’ strategy is nearly always adopted. For instance a seller pricing their home at £499,000 instead of £500,000. Although in this instance the buyer, in their mind is paying £500,000 and there isn’t any saving at all – although £1,000 has been knocked off. Nonetheless, there’s a fair amount of psychology — and strategy — that goes into determining a home’s asking price.
When selling your house, you and your estate agent should sit down and agree on the approximate value of the property (No estate agent or anyone for that matter can put an exact value on your house). Let’s say that you agree your property is worth about £650,000 based on comparable properties sold in your area and other important market considerations. The next step is to understand the price ranges for the listing price. To achieve as close as this as possible, again depending on the time of year, comparables currently for sale and inventory, a suitable price range could be anything from £630,000 to £670,000. When dealing with the million pound market, you’ll find the price range typically goes a bit higher. So a home valued at £1 million could range anywhere from £950,000 to £1.5 million.
Once you have a price range in mind, it’s time to nail down the final listing price.
Here are five pricing strategies for sellers:
1.Appeal to the masses
Given the nature of the buying and selling of the real estate market and the huge amounts of money involved, a buyer doesn’t want to be the only one interested in a house – it seems odd to think no one else has taken notice or interest and there must be something wrong. If you’re in a hurry to sell quickly – pricing your property at the lower end of the spectrum could stimulate interest among a huge amount of people creating a herd mentality – this could then lead to a bidding war between several interested parties, even exceeding the higher price bracket set. This could also work if your property is unique and know it’s in high demand – reverse psychology.
2.Price it to be found in property searches
Buyers will call up an agent and ask them to be added to a database with certain criteria placed next to their name, so maybe looking for a 4 bedroom semi-detached house under £500,000. An agent will then register them under these details and anything that comes onto the market under £500,000 they will be notified about. But going back to the point on price ranges, if a house is priced at £520,000 there may be a chance that the buyers are never notified as they said they wanted to know about everything under £500,000.
Knowing how flexible home prices can be, a savvy agent will look out for houses that fit the specification that is priced within a reasonable range of what the buyers want to pay and notify them. Often times the buyer can offer under the list price, or the property will get reduced.
3.Keep the numbers simple.
Some sellers like to over complicate things. If a home is valued between £750,000 and £800,000 don’t decide to go with a listing price of £781,450. It doesn’t make sense and doesn’t look right. Such an oddly specific figure calls the wrong sort of attention. Buyers become curious about why a price like that is shown and that leads them to other uncalled for thoughts.
Best practice suggests, keeping the price as simple as possible, £781,000 or even £782,000 sounds a lot more enticing. The goal is to showcase the property, nothing else. Getting quirky with your asking price counteracts this tried-and-true strategy.
4.Work out a pricing contingency plan before you put your home on the market
It is quite a common occurrence when sellers have high expectations about their property and its appeal and they want to ask top dollar for it, even if the agent doesn’t totally agree with their views. It is also a very common theme that agents plant a high price tag in a sellers mind to win over the instruction.
Whatever the reason, an agent will agree to try and sell the home at the higher price. But a good agent will, before the ‘For Sale’ sign goes up and the property is presented to the market, always try and work out a contingency plan with the seller, in the case the property doesn’t go for the desired price. By having everything laid out on the table and making sure both seller and agent are on the same page, a Plan B would be set up, should anything not go the way it was planned. This saves time and helps set the appropriate expectations in the seller’s mind, so there are no unpleasant surprises down the road.
5.Leave yourself room to negotiate
Listen carefully to what your agent has to say about the pricing strategy. They know what works and doesn’t and can read the market and its conditions for a more positive outcome. As with any strategy implemented, be prepared to have ongoing discussions about pricing with your estate agent.
Pricing a home isn’t a onetime set and leave procedure. A lot of factors constitute to a home’s price and not all of them can be accounted for right at the very beginning. Leave your self-room to move around on pricing, be quick to react to changing market conditions or new information and you’re more likely to get the best price with the least amount of aggravation.
Get in touch today if you’re struggling to come to an accurate valuation of your home and lets together work out a plan that suits your needs best. Your Home is Our Vision.