Much has changed in the past several years as to how people look and search for potential properties to purchase. Today more than 95% of all potential buyers start their search on the internet. This has, for better or for worse, changed the way “price” is used as a criteria for their search. As you probably already know, when searching for real estate on the internet people search for the perfect home within a given price range; and this is done typically with pre-determined “drop-down” pricing “brackets”. For example: if you are looking for a property in the “$200,000 to $250,000 price rage, you would plug these parameters in to the computer and viola only homes within this price rage appear in the search results.
What we know about the average real estate consumer.
People will typically purchase toward the top of what they “qualify” financially for. In addition, all things being equal, of the homes that are priced in a typical price range, say a $200,000 to $250,000 range, the homes that are priced closer to the $250,000 price point will typically, but not always, be nicer (bigger, more polished, more updates, newer, etc.) whatever the case may be, and thus be more attractive to the average buyer. The reality is that for most people, when looking for a “good buy”, don’t just look at price. A nicer, larger home that needs less work, even at a slightly higher price can and often is considered the better buy.
Does the change in the way people search effect how one should price their property? Yes.
I have heard many people tell me similar stories about their home or property listing in relation with it’s asking price. It usually goes something like this: “Our home was priced at $XX and received little activity. We then made a small price adjustment and the result was a boom in activity and one or more solid offers! What happened!” What most likely happened was the small price reduction was enough to put the listing into a different search “bracket” and consequently show in the search results to a whole new group of prospective buyers. Initially the home was listed on the bottom end of a higher search bracket and was competing with other homes that were likely to be larger or nicer in general. After the small price change the home now shows up in the search results of a completely new consumer, and is at the top of their search bracket and is now competing with homes that are smaller or not a nice, making the home much more attractive. Good Realtors usually tell you to “price it right” and the home will sell quicker and ultimately for more money. By the way, this is true. There are several reasons for this and a sound real estate pricing strategy is just one of those reasons. You may want to check out this article as to why you should never list your home ending with a “9”.