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Is Using Charm Pricing A Good Idea When Selling A Home?

February 14th, 2017 by Michael Oliver

Priceless book by Poundstone

Small pricing differences in the list price of your home can make some large differences. This book by William Poundstone is a great read to help understand how pricing works in the real world.

Does setting a more exact list price work better for you as a home seller? Statistically yes; it gets you a higher sale price and buyers are less willing to bring in low offers.

I have always tried to set listing prices of homes to the point of just under the price level with a somewhat exact feel to it. For example instead of listing a home for sale at $450,000; I would prefer a seller choose $449,990 as the actual advertised price. The reason is this type of rounding is called Charm Pricing, psychological pricing, or price ending and tends to be effective in selling.

Part of what is at work is what are called “Charm Prices” charm prices, as the name implies is they look good. Theories differ as to why these charm prices are effective some ideas are that they are simply lower means more attractive to buyers. Other studies suggest that these charm prices equate to a “deal” or value. “The seller took off a few bucks to give me a good deal.”┬áStill additional theories go as far as stating charm prices work because humans simply like the number nine and it is more attractive so that’s why prices tend to end in nine and people buy more of those priced items. Study after study typically ends with the fact a “charm price” almost always brings in more sales AND a higher sales price than just a low price by itself.

In real estate sales this is a very important idea to understand as buyers shop in what we call price bands. A buyer will usually look for homes priced between $400k and $500k so here being a little less expensive makes it feel psychologically much less expensive. I have had buyers tell me; “I don’t want to look at any homes over $1 million.” The exact same buyer will still look at a home priced at $995k or $999k without feeling like they are spending a million dollars. Simply put buyers specifically in real estate have comfort zones and you as a home seller want to stay in them if you want to sell for the maximum pricing possible.

When selling a home consider all of your options pricing allows. For my clients and in my experience charm pricing is very effective and also allows buyers on the other end of the deal to feel they are getting a bit of a deal. If you would like to know more about this concept Wikipedia has a quick read. To understand a more complete picture of what is going on Priceless by William Poundstone is a great read.

 

-Michael

 

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Michael Oliver - Best Tucson Realtor