Is “just below” a better home pricing strategy?



Listing prices should be set just below whatever round number you have in mind, according to a new study published in the Journal of Housing Research.

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The study shows that buyers are more often than not tempted by homes offered “just below”, for example a $199,000 listing instead of a home listed at a nice, round $200,000.

“Our study suggests that by using the just below pricing strategy sellers can price their home slightly higher without driving away potential buyers,” said Eli Beracha, one of the study’s author. “As a result, they end up selling their house for more.”

The tactic is an old one that’s been used in retail for decades, but the research surprisingly shows that homes which are listed “just below” often collect a higher selling price – around 2.5 to 3 percent higher, or $5,000 to $6,000 – for homes listed at or around $200,000.

However, the research also shows that rounded priced homes are usually on the market for shorter periods, and have a lower discount relative to the listing price.

Still, the ability of sellers to set a higher listing price using a “just below” pricing strategy is worth more than the benefits of a rounded price strategy, the researchers concluded. As such, they feel the “just below” pricing strategy is the one that works best.

“We tested the age-old debate concerning the best technique to price a home when listing it for sale,” Seiler said. “We find that using a price just below a round number works best, particularly in connection to the left-most digit in the price. So, $199,000 works better than $200,000.”

Then again, despite the researchers claims, we feel it’s necessary to point out that many listings sites, such as Zillow, Trulia, Realtor.com and more, allow searchers to filter homes according to price. As such, any home listed at $199,000 would not be seen by those searching for homes priced $200,000 and above, despite the property basically being in their price range. Some food for thought!

About Mike Wheatley

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at mike@realtybiznews.com.