When you see a €499 price tag when compared to a €500, is it that big a difference? Of course not. Yet retailers have been pricing products just below a round number because, psychologically, €499 looks and feels more like a deal than €500, even if the difference is only €1.
In the world of real estate, the "99" tactic is virtually always employed. For example, if a seller prices their home at €499K instead of €500K, the €1K they lose will cover some of the buyer's closing costs, but in the buyer's mind, they are paying €500K. However, in most cases, chopping off €1K to bring the price below a rounded figure doesn't make that much difference to a buyer or seller. Nevertheless, there’s a fair amount of psychology – not to mention strategy – that goes into deciding a home’s asking price.
If you're a seller, you should discuss, identify and agree on the approximate value of the property with your estate agent. Let's say for example, you determine your home is worth around €500K, based on comparisons of similar properties sold in your town or village area and other market considerations.
The next stage is to know the price range for the list price – in this case, somewhere between €480K and €520K, depending on market conditions, competing properties, time of year or inventory. The price range typically goes a bit higher with more expensive properties; a home worth about €1 million might have a range of €950K to €1.05 million. Once you know your home's worth and have a figure and price range in mind, it's time pin down the final "list" price. 77 Great Estates decided to share with you five useful pricing strategies sellers should implement:
1. Be a 'Crowd Pleaser'
As much as you might not like this strategy, sometimes it pays to appeal to the 'herd mentality'. Considering the high risks of real estate, a buyer doesn't want to be the only one interested in a house. By pricing your property on the lower end of the value range, you could rouse interest among more than one buyer. Also, if you want a quick sale, this is generally a viable option.
2. Price it to be found in real estate searches
Let's assume a buyer tells their agent they want a three-bedroom home in a certain neighbourhood under €500K. Our real estate agent may then set up an automated buyer search in their local database for properties under €500K. But if a home is listed at €510K, that specific buyer will miss it. So, if your list price is higher by a rather small margin, you may miss a fragment of buyers.
Although this situation is common, many savvy agents will set up search factors for their buyers to include properties listed slightly more above their price ceiling. Understanding how malleable home prices can be, buyers should be conscious of properties that could be a good match for them, even if those homes are beyond – but within realistic range of – what they want to pay. Normally, the buyer can offer below the listed price or at times the property will get reduced.
3. Forget being 'creative' with your asking price
At times, sellers decide to be creative with their asking price. Imagine a seller whose home is valued between €750K and €800K, and its asking price is €787,777. You’ll probably be just as confused as other buyers out there. Such a peculiarly precise figure calls attention to itself, and for no good reason, like a house painted pink. Purchasers will usually wonder why the seller chose that specific figure. From there, they get curious about who the seller is, and so on. So our advice is to do away with imaginative price figures. Remember the ultimate goal is to showcase the property, not the seller and it’s important to appeal to as wide an audience as possible. Being eccentric with your asking price counteracts this tried-and-tested strategy.
4. Work out a pricing contingency plan
Occasionally, sellers have high hopes about their property's charm and want give it a price tag that reflects this, even if their agent doesn’t believe they'll get it. Whatever the reason, as a listing agency, we usually agree to try and sell the home at the reasonable price for both buyer and seller.
Before putting their home on the market, however, it's always a good idea to try to work out a contingency plan with the seller, in case the property doesn’t go for the anticipated price. By laying all the cards on the table from the outset, we'll have a plan B should the first plan unravel. This saves time and helps set suitable anticipations in the seller's mind, so there are no nasty surprises down the line.
5. Understand that pricing is an constant dialogue
Like any strategy, you need to be prepared to have a continuous discussion about pricing with your real estate agent. Pricing a home isn't such a clear-cut procedure. You must acknowledge that many factors come into play when selling or buying a home, and not all of them can be anticipated. Being flexible and reacting quickly to an ever-changing market will make you more likely to get the best price with the least aggravation.
Bonus Tip: It's also a good idea to keep the seller in the backdrop, if not entirely invisible. Sellers are usually advised to remove all their personal belongings (such as photos, diplomas, and the like) from their homes and decorate in neutral colours.
Ultimately, it's always beneficial to listen carefully to your agent’s pricing stratagem. It's their job to know what works and doesn't. If you're interested in buying property or selling your home in Malta or Gozo, contact 77 Great Estates today. Our team of skilled estate agents will be more than happy to give you the sound advice you need in every step of the way!
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