The psychology of pricing

7 Replies

This is sort of a weird question but bear with me......I work for a builder and am also an investor on one of our projects - we do new construction spec builds in higher end areas usually between 1M-2M......we've been sitting with our house a little longer then we expected at this point - we dropped the price 70,000 from the initial listing price and am contemplating our next move if we don't get bites in the next couple weeks....my question is how much of a drop is worthwhile? For example say a house is 1.1M - if you drop the house to 1,090,000 (10k drop) do you think this accomplishes anything? I don't think this brings in a new set of buyers but does show realtors that we are willing to work with a lower priced offer.....on the flip side lowering if in 50k increments brings in new buyers but also costs us 40k over the 10k drop......I'm not sure if there's a right answer here but would love to get some feedback.

I'm my eyes, all a 10,000 drop means is that you are trying to get your listing to show up on people's auto email again.  Such a tiny drop in price doesn't indicate that you are willing to work with lower price offers.  It means to me that you are being tight and very possibly difficult to negotiate on price. 

How much is it costing you to hold it for another 3months?  Figure that in your price drop.  Have you rerun current comps to make sure you are still in line?  Are the features in the house in line with the neighborhood competitions?  Have you tried luxury open houses, like wine and cheese hours.  Is it staged so you could have an evening open house to show what it would be like for buyers to come home to their new home?  Coordinate with a local music quartet to play at the home as a fund raiser and advertise the heck out of it ( as a fund raiser, not the sale of the home).  Just a few ideas to get traffic to your property.

Instead of dropping the price, maybe offer seller-financing on the amount you were going to drop anyway?  If your listing is adjusted to say 'owner financing options' or some such that should generate some interest, too.   That $70k seller-financed may help get your buyer over the down payment hump.  As long as you are priced well and staged well like @JOAN DICKIE points out, this may help.

Sure, you will get a bunch of investor tire kickers at first, but it's activity.  (Disclaimer:  I am no expert on listed million dollar property!)  Just an idea @Joseph R.  Good luck!

I'd have to say Joan has it 100% correct.   There's just not anything more to say!

BEST LUCK!

Originally posted by @JOAN DICKIE :

I'm my eyes, all a 10,000 drop means is that you are trying to get your listing to show up on people's auto email again.  Such a tiny drop in price doesn't indicate that you are willing to work with lower price offers.  It means to me that you are being tight and very possibly difficult to negotiate on price. 

How much is it costing you to hold it for another 3months?  Figure that in your price drop.  Have you rerun current comps to make sure you are still in line?  Are the features in the house in line with the neighborhood competitions?  Have you tried luxury open houses, like wine and cheese hours.  Is it staged so you could have an evening open house to show what it would be like for buyers to come home to their new home?  Coordinate with a local music quartet to play at the home as a fund raiser and advertise the heck out of it ( as a fund raiser, not the sale of the home).  Just a few ideas to get traffic to your property.

 The biggest issue with holding costs outside of paying interest/taxes/etc is the opportunity cost - being able to take this money into a new project is huge and we're trying to move this and move on to the next one....I think we're right on the money currently with price - we've gone over the comps many times and feel we're slightly below the market offering a ton of value.....Do you think staging is effective on a new higher end homes? We haven't done it yet and it seems other builders are 50/50 in terms of staging vs not staging.....maybe its an option we need to explore more.

I had a nice high end home that was not moving almost 6 months, kept getting lowball offers.  Did the staging and promos... Under contract 22 days... GONE!

Don't know your market but staging at this point can't hurt just don't do it with "Wholesale Bill's Furniture". 

Can you put a value to those opportunity costs? They can be very expensive in that price range. 

We have more than 10K in bathroom faucets in the 750K home outside Ft. Worth, at a million I wouldn't even look at less than a 10% drop, 10K won't even cover the fridge and wine cooler. 

I've seen price reductions of 10% initially and smaller increments weekly until it's sold, some will wait but someone will feel like they will miss the opportunity at some point. If it gets too low, take it off the market, the builder might consider moving too. 

Any property that hangs on the market too long becomes ignored, people start to think something is wrong with it if others in the same price range are moving and it takes a big dip to gain attention......or take it off the market and let that perception die. 

We don't do million dollar specs here, LOL, that would be a rough game. :) 

Medium logoscopiccroppedblue2Bill Gulley, General Real Estate Academy | https://generalrealestateacademy.com

Absolutely stage.  It is proven that if staged properly, the property will sell.