Price Point: What’s the Magic Number?

Price Point: What’s the Magic Number?

In Selling your House by The Horton TeamLeave a Comment

Last Updated on March 14, 2024 by HortonTeam

Most sellers the Horton Team talks to say they want to get the most money in the shortest time with the least amount of hassle. This leads us to the most important question: how should you price your house? In this post, you’ll learn about the price point.

Price Based on Competition

You often hear that price is the reason whether or not a home sells. The market activity for your house will be heaviest in the first three weeks after listing, so it’s important that you don’t price too low or too high. The best strategy is to price based on the competition.

Pricing too low will bring forward many offers, but remember the goal is for you to sell for the most money. However, pricing too high to “test the market” can turn off buyers, causing your home to sit on the market for an extended period of time.

Many sellers think they can simply lower the value if there’s little activity over a few months, but most buyers and agents will begin to ignore a house that has become stale on the market. The highest possible value is most likely to come forward in the first weeks after the home is listed, but only if it is priced properly.

To establish a price point for your home, search the area for comparable houses and analyze their prices and features. Each home is different, but doing this comparative analysis will help you understand where to start when coming up with a price. Remember a property that is “priced to sell” will get attention right away and will often lead to a quick sell or multiple offers.

Old Pricing Methods

If you drive around looking at other houses for sale, you’ll probably see many of them priced the same way they were 15-20 years ago. Back then, before the internet became the preferred means of search for homes, a real estate guru encouraged agents to list their $200,000 homes at $199,900 or even $199,888 for a few reasons, both of which deal with psychology.

At $199,900, the buyer may have felt like they were getting a much better deal. There are several strategies that utilize some form of this psychological pricing, which is why most sales prices in stores are $19.99, $49.99, $99.99, etc. The second reason is that back then, agents used the MLS book to find properties for their buyers. This book would sort homes based on value, so a house priced at $199,888 would be listed before all the $199,900 and $200,000 homes, and it would probably catch the agent’s eye, too.

The crazy part? Homes are still listed this way, and we haven’t used the MLS for over fifteen years.

The Correct Pricing Method

As previously demonstrated, Zillow isn’t the best at coming up with accurate pricing. They advise consumers to maintain these dated and incorrect pricing strategies by saying the difference you’ll lose in money is made up for by buyers feeling like they’re getting a much better deal. The Horton Team advises consumers to price their home in a way that accounts for the modern buyer’s preferred searching method: the internet.

When deciding how to price your home, it’s important to note that for every price ceiling there is a price floor and that you want your home to show up on both sides. Most websites like Zillow, Trulia, Homes, and even our own site allow buyers to search for homes based on pricing intervals.

While a few of the sites offer various price blocks, the most common standard comes in $25,000 intervals. With that being the case, we advise our sellers to price their homes on one of these intervals whenever they can.

Remember the house above listed at $199,900? A buyer looking for a home in the $200,000 to $225,000 wouldn’t see that house because of the way these websites’ searching parameters work. The seller is essentially losing half of their buying pool by pricing their home just under or over these common price point blocks.

If listed at $200,000  the seller would expose their home to those buyers searching in the $175,000 to $200,000 range as well as those searching in the $200,000 to $225,000 range.

A buyer may be approved for $230,000 or $235,000, but never $232,000 or 234,900. This is partial because it feels more natural—you wouldn't set your search parameters for a new home at $230,100 to $234,999, would you? Click To Tweet

Sometimes your house’s value doesn’t allow for pricing on one of these common intervals. When that’s the case, it’s important to always remember the “five thousand dollar rule.” Buyers typically search for homes in $5,000 intervals, mostly because lenders generally approve in $5,000 intervals as well.

A buyer may be approved for $230,000 or $235,000, but never $232,000 or 234,900. This is partial because it feels more natural—you wouldn’t set your search parameters for a new home at $230,100 to $234,999, would you? Someone who is approved to spend up to $235,000 will usually look anywhere from $210,000 to $250,000.

If that’s the case, any home listed as $209,500 or $250,900 will miss the mark and consequently cut out half of their buyer pool, all for the sake of a few extra hundred dollars.

Pricing sounds complicated, but it doesn’t have to be. As long as you remember to expose your house to the largest pool of buyers, your odds of selling for the highest price point in the quickest time with the least amount of hassle will be as high as possible.

If you’d like to learn more about the detailed science and consequences of pricing your home in certain ways or would like to buy or sell your home in Newburgh or Evansville, contact the Horton Team today with your questions!

Price Point whatst the magic number infographic

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