Rounding It Out v. Charm Pricing
Charm pricing has been the norm in Nashville real estate for decades. By charm pricing, I mean rounding the price down to end in $900 or $999. Psychologists long ago decided that the human psyche was easily tricked by such games. It’s the way nearly every shop in America prices their goods. However, pricing strategies in real estate are changing. Let’s talk about why.
The National Association of Realtors® tells us that 85% of real estate transactions happen because of the internet. Either the buyer sees the house online and asks their agent to see it, or the agent sees it on the MLS and recommends it to the buyer. Either way, the internet is what got the ball rolling.
85% of real estate transactions happen because of the internet
You’ve probably noticed that many real estate websites these days offer drop down menus that feature pricing bands. For example a buyer could choose to look at properties from $150,000 to $200,000 or $200,000 to $250,000. Let’s examine the online search experience of a buyer hoping for spend about $200,000:
Can you see the logic in setting the price on the big round number? As a marketer, it’s my job to get the house in front of as many potential buyers as possible. That’s why I recommend that sellers price on round numbers. My preference is to price in increments of $25,000.
However, if the “comps” tell you a number that is too far away from a logical cut off, I believe you should take a chance on the charm strategy. If the comparable sold properties tell you that your house is worth $316,000 for instance, pricing competitively at $314,900 might make the most sense.
Don’t over-price to hit a round number, but don’t under price either and potentially leave money on the table. It’s actually pretty hard to underprice a property in Nashville right now. Multiple offers are common place after just one weekend. It is not unusual to see offer prices well-above the asking price. But this almost never happens when a property is overpriced. To get the most attention, a home must be priced attractively enough for a buyer (or several) to feel compelled into drafting a bid.
This strategy has lead our team to much success in recent years. Over the past 24 months we’ve averaged a 100.2% list-price to sales-price ratio. Not only that, we’ve sold every single listing we’ve taken during the same time frame.
Granted, this is also indicative of the incredible real estate market we are experiencing right now. I couldn’t tout that kind of success before the boom.
Well, that’s my two cents on the pricing strategy debate. Please comment below if you have questions or a differing opinion on charm pricing.