Why listing at $199,999 is a bad idea. Episode #278
Todd: Hello. Welcome to Todd Miller TV. Joined here today again with Oana. First I want to congratulate Oana. She was elected to the MLS Committee. It’s one of the major committees. It deals with all of the major issues regarding the MLS and it’s an elected position. She’s on it for three years so congratulations
Oana: Thank you.
Todd: OK. So we’re going to talk a little bit about the MLS specifically a mistake that a lot of consumers and agents make in pricing their property. You guys may not be aware I’m an MBA so I have a lot of training in all of the different aspects of business.
One of the things traditionally that retail like gas stations and places that sell retail items have done is they have this pricing model where you price everything at 99 cents. Nothing is $2. It’s $1.99, even gas. Gas is like $3.54 and nine-tenths. You never price it on the money like a dollar. It’s 99 cents. That’s why there’s the 99 cents store, right?
Todd: OK. So with that in mind, consumers and real estate agents have taken this crazy notion to do something. I think it’s crazy. I’m going to let you tell me your opinion about it.
You’ve got a house worth about 200,000 so you price it at 199,900 which is one of the things Bank of America does on all their listings. They drop it down to the 900 intentionally. Talk to me about as a practitioner and as an MLS member now why you think that’s a bad idea.
Oana: OK. So there are kind of two schools of thought on that.
Oana: The first school of thought is the reason you go with the 99 is because your brain just recognized the first number. So when you price something at 199, your brain just looks at the 1 and doesn’t convert it to a 2 which is realistically it’s 200, right?
Oana: So that’s why they price things to 199 and 299 because your brain only looks at that first number. Now, when you’re trying to sell something, maybe there’s something to that. However, when you’re pricing things that way, like real estate, that’s a whole different ballgame because real estate is different.
Real estate is different because of the way we do our searches. When you go into some website and you’re looking for a house, you’re looking for a house between 100 and 200.
Oana: Or you’re looking for a house that’s under 200 or under 300 or between 200 and 300. You don’t put in 199 or 299. So because of that, when you price your house at 199, and I’m looking for a house that’s between 200 and 300, I’m never going to see your house because your house is a dollar less than what I’m looking for and I’m never going to see it.
Well, realistically somebody who’s looking for a house at 200 and under will still see your house. So you’re actually missing a whole segment of the market for no apparent reason.
Todd: OK. So there’s not actually a search called “under 200,000” in our MLS.
Todd: You can only search 200 and below. It’s always inclusive of that whole number. So I think that’s a good point because there’s no way to just capture the houses just under 200. This is typically what I see. People will say, “I’m looking for a property. We want to be in the 200 to 250 range,” because they figured that stuff less than 200 is probably smaller or not as nice as what they want but stuff over 250 is more than they’re willing to pay which is how most people think when they buy.
The high range is how much they can pay. The low end is they don’t want to be below that for whatever they believe their lifestyle should be like. So they will say 200 to 250. Now what most agents will do is they will go sit down with them and go 200, 250. Put it in and pull up the properties. They will go look at the properties, pick the five best and then write an offer on the one they like the best.
Todd: So the 199 might have been a better property. It might have been perfect for them but they never saw it because someone is trying to be cute and priced it at 199.
Oana: Right. So make sure that your house is priced in a way that is going to get the most people looking at it. So think about how searches are done. Don’t be so concerned with sticker shock. Focus more on how the searches are run because if you focus on how the searches are run, that’s how buyers get to see your house and that’s the point of it is you want your house to come up on the most searches because the more people see your house on the internet, the more people are likely to walk through the door. That’s how your house gets sold is by people seeing it.
Todd: Awesome. Well thank you very much.
Oana: You’re welcome.
Todd: Congratulations for getting on the MLS Committee.
Oana: Thank you.
Todd: All right. So for those of you who don’t know, Oana also is finishing up a term on Grievance Committee.
Todd: And will be our professional standard. So she will be policing all of the agents who are doing unethical things and stuff like that. So it’s pretty awesome. All right. Well, thanks for watching today’s episode and hope to see you on another show. Bye.