Our friend Richard Riccelli sends this along from the Boston Globe:
Home sellers are learning what any retailer, from Wal-Mart to the owner of the corner gas station, already knows: Low prices are one of the surest ways to beat the competition.
Coldwell Banker Residential Brokerage, Massachusetts’ largest real estate firm with more than 3,500 agents, is coaching agents on how to persuade clients to list their homes at an asking price that undercuts those of comparable ones on the market.
The hope is low prices will attract more prospective buyers, leading to faster sales. Other real estate agents in the Boston area report success with similar strategies in a housing market with an unprecedented glut of properties for sale.
Called “drama pricing” or “energy pricing,” it is a drastic measure for difficult times. And it seems to run counter to the conventional strategy of selling your home for the highest price possible.
Buyers are “overloaded” with options and “only respond when they see a perception of value,” said Angela Stamoulos, who teaches Coldwell Banker’s course on this pricing technique, which the firm rolled out this spring in Connecticut and last month in Massachusetts.
By grabbing buyers’ attention, she said, “the true market value of the property comes to fruition.”
Newspapers dumb everything down. The topic is not fire-sale discounting but using price to establish market differentiation.
Working with competitive listings, you try to identify a price point at which your home will stand out from the herd. This requires a certain amount of fortitude: You have to be willing to acknowledge where your home stacks up against its competition.
If your home has appropriate upgrades, it might be worth a little more. If it has pet odors, it’s worth a lot less. If you have six nearly-identical competitors, you may have to choose a price lower than you wanted, even if your home is objectively the pick of the litter. In that circumstance, pricing above the true dogs but below the homes that are almost as good can make your house sell while the others languish. Buyers will see your home as the best overall value.
We’re not trying to score points on the neighbors. The goal is to get your money into your pocket on your timetable. Pricing strategy can swing the balance.
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