There are a lot of theories about how to price something to sell. You’ve often heard that the $1 million property should be priced at $999,000 because it sounds cheaper than $1 million. Your $500,000 property should be priced at $499,000 because that sounds cheaper. Right? Let me debunk that theory with respect to how people search for real estate.
It’s actually more important to not price below a "fulcrum" number. Fulcrum is a term that I created to describe a way of driving the leverage of pricing to attract people from both sides of an equation. The equation being that somebody is looking for a $300,000 to $400,000, or $400,000 to $500,000 house. They’re going to be better priced if the owner prices the house right at $400,000, not at $399,000. Or at $405,000. Not to be below or above unless it’s clearly worth $425,000 or $435,000 or $445,000. In which case you really are only shopping for the $400,000 to $500,000 buyer, right? But if you’re close to a fulcrum number like $400,000, $500,000, or $1 million — price at the $1 million mark.
I have a home that I listed in Copenhaver a luxury sub-division in Potomac, Md., which will go on the market in February. It’s probably a $980,000 to $990,000 house. But as the seller and I discussed it, we can use the fulcrum pricing method for buyers looking between $900,000 and $1 million and even $1.1 million. So we get two different, distinct buyer groups who may consider looking at the property that we would lose if we priced $5,000 higher or $5,000 lower. See what I mean?
Furthermore, the Christie’s International Real Estate luxury brand marketing is for properties at $1 million and above, which means that I will get exposure for my listings if they’re priced at $1 million or above, but of course, it has to be justifiable. So if it’s close to a $1 million property we might go at $1 million because it will open up that listing to 15 different additional sites – New York Times, Wall Street Journal, and lots of other luxury sites. So there are sometimes benefits in terms of exposure by pricing up at a certain point. Not just the fulcrum search between $900,000 and $1 million, or $1 million and $1.1 million, but also, in this case, you’re getting the Christie’s brand, getting the Christie’s network of luxury buyers from all over the world.
What else is important in pricing?
Over the last five to ten years, a large demographic of Chinese buyers has come into the marketplace. Learning what is attractive and not attractive culturally to potential Chinese purchasers helps to understand how to attract them to my listings. For instance, the number eight is a number of wealth. There was a development in Miami that was sold several years ago whose addresses was 888 and eight stories tall, with eight units on each floor. On the first floor, the first apartment was 108, 208, 308. They skipped 408, because four is the number of death, and continued with 508, 608, 708, 808, 908. This numbering continued all the way to the top floor and the highest priced condo on the top floor, 888 with a $100,000 price tag increase.
Being aware of a demographic draw, for a specific area, based on demand for that area, you can attract or detract people’s interest from something simple like that. You might say, “Now really, Stewart, come on. How much impact is that really going to have? It’s not really what’s going to cause someone to buy or not buy a house. Right?” The price that you ask isn’t the determining factor. It’s more like the cherry on the top of the pie. Pretend the cherry on the top of the pie is Coca Cola. They want the Coca Cola. If they get the cherry too, they feel that makes it extra sweet! An example, in terms of condition when I’m putting a house on the market, is if you put some mulch around the exterior. You don’t spend more than $2,000 to $3,000 and the impact is like putting a bow on the outside of a package. When you present the house a majority of people will think, “Wow! This house has been prepared. This house smells like something new has happened.”
So when it comes to pricing, you want to think about the people that you are attracting based upon the potential demographic interest. We talked about fulcrum pricing, to attract buyers from both sides of an equation or where there may be an actual split in potential marketing opportunities at a specific price point. These are things to consider when it comes to pricing.
I have a home in Potomac, Maryland, that will come on the market in late January or February. That will depend on weather. It doesn’t happen often, but sometimes we’ll have two weeks of January weather where the low is 38 degrees at night and the high during the day can be 62. It starts to feel like springtime even in January. Well, it does a strange thing to the mental state of purchasers. It’s like sap going up the trees in the springtime. It starts the process of growth. All of a sudden, buyers start to come out and look for real estate.
So when I prepare my listings I try to get them ready to go on the market by the middle of January in case the market comes in early. I’d rather be ready to pull the trigger than not. And, it makes no sense to me to interview your agent just before you decide you want to sell it. You should interview the agent well in advance of that, decide which one you want to hire to coach you through the process of what to do to get ready. That makes sense, right? And you’re not paying the agent until they sell the property anyways so why not get the benefit of that coaching?
For the property in Potomac, one of the considerations was pricing and the particular demographic. We put a bunch of eights in the number, so you can anticipate who I would expect might be the potential purchaser. The same is true for a property in McLean that I’ve got. We’re going on the market at $1,888,000. Now, it’s the cherry on the top of the value. The value is at $1.9 million. The value is there for potential purchasers. You price it to sweeten it up and make it the perfect number to cause people to go “Oh, that’s a good number. I like that number!”
We’ve discussed the importance of looking at timing for the market and the amenities. To find out about 2-for-1 and the best ways to make money, I encourage you to read my Market Ready Guide, which you can easily download from my website, www.ericstewartgroup.com. It gives you the details of what are the best improvements you can make to get top dollars.
