Picking a Proper Home Selling Price - Technology Evangelist

Redfin's new Real Estate Scientist service plans to crunch info and report on trends they see in the home listing data they deal with on a daily basis.

One nugget that jumped out at me was the listing traffic benefits gained from pricing a home on a round number rather than a dollar higher or lower:

The Real Estate Scientist

We’ve tried to put this information to good use. We know that listings that debuted on Friday rather than Thursday drew 7.7% more visitors; that a vacant home increased the odds of a price reduction by 9.5%; that, because of how real estate websites filter on price, a listing priced at $351,001 got as much as 7.1% less traffic than one priced a dollar lower. A team of agents, engineers, statisticians and writers worked together to produce the report. Some of their findings are surprising, while others confirm conventional wisdom, which has value too.

This seems to make perfect sense since listing sites tend to allow users to filter by fixed increments. By listing a home at $350,000, you'll show up in searches for $300,000-350,000 AND searches for $350,000 - $400,000.

But what about the psychology of pricing? Would the house appear cheaper to buyers if it was listed for $349,999?

I haven't looked into this much, but here's my gut take on whether this effects actual home sales: Nobody buys a house at the low end of what they can afford. It just doesn't happen. So gaining additional traffic from the $350,000 and up crowd isn't going to bring in the type of person who will seriously consider buying the home.

When I was at Apple many years ago there was a pricing volume study that showed significant bumps in volume when you went from $599 to $499, less when you went to $399 and more when you went to $299. Going from $299 to $199 was HUGE, as was $199 to $99. Going to an intermediate price such as $149 didn't get much.

I guess that is why instead of offering a $50 discount, you now get $50 redemption coupons instead.

Comments

1. Posted by: Ken Montville on December 27, 2007 6:20 AM:

In addition to your gut reaction about people buying at the higher end of their search criteria vs low end there is also the age old, tried and true methods used by retailers for decades. You may notice that most of everything you buy is $x.99 or $x.87 or some variation of a little less than the next highest dollar amount.

The concept behind this, as I understand it, is that there is the subconscious message that a consumer is paying less (although it may be pennies). This is why I think houses sell better or, at least get more attention, if they're priced at $349,900. After all, it's less than $400,000 which seems like a whole other category and much more expensive even though it's only $100.

So, I think your gut it on the right track.

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