Pricing Methods

You can ask any price you want for your house. But your house won't sell until you find a buyer who agrees that it's worth the price you're willing to accept. Smart sellers know that although only one person sets a price, two people -- a seller and a buyer -- make a sale.

Adverse factors outside your control (such as a glut of houses on the market, high mortgage interest rates, or dismal consumer confidence) may negatively affect your sale price. Even so, you don't have to passively let the real estate gods crush you -- quite the contrary. Here are proven ideas you can use to create demand for your house no matter how poor prevailing market conditions are.

Quantum pricing: an effective technique

Buyers use price limits, called quantums, to simplify house hunting. Pricing quantums are initially expressed in nice, round, easy-to-work-with numbers, such as $100,000 and $50,000, and then fine-tuned to $25,000 and $10,000 quantums. Here's a technique. Follow these steps to use price quantums to hone your initial asking price to razor sharp, pleasure-pleasure-panic perfection.

Put yourself in the buyer's shoes for a moment and imagine that you're buying, not selling, your house. If you're like most people, one of the first things you do is decide how much you want to spend. For example, you set your upper limit of affordability at $150,000. If you are working with a real estate agent, you probably tell the agent, "I don't want to spend more than $150,000," or "Don't show me anything that costs over $150,000." Why waste time looking at property you can't afford to buy?

Buyers from higher-price quantums occasionally look down into a lower quantum in their search for a house. However, they rarely swim up to a higher quantum (if they establish realistic affordability limits). Thus, for a house to sell, the price must drop down to the buyer's price quantum, because the buyer can't afford to swim up to the house.

Establishing price quantums

Follow these steps to use price quantums to hone your initial asking price to razor sharp, pleasure-pleasure-panic perfection:

Determine your house's market value within the appropriate $100,000 quantum, unless you happen to live in an area where no house has ever sold for more than $99,999.99.

Use the comparable market analysis (CMA) method to define a general price range for your property. For example, if a CMA shows that five houses similar to yours in size, age, condition, and location sold within the past six months for $215,000 to $240,000, your house clearly belongs in the $200,000 to $300,000 quantum.

Adjust the price within the correct $50,000 quantum. Continuing with the same example, decide whether your asking price should be over or under $250,000. Because not one of the comps sold for more than $240,000, your price belongs in the $200,000 to $250,000 quantum. As problems go, still no head-scratcher.

Fine-tune your price to the closest $25,000 quantum. The more accurate your pricing, the more exacting your scrutiny. Deciding whether the price should be in the $200,000 to $225,000 quantum or the $225,000 to $250,000 quantum requires careful analysis. If, for example, four of the five comps sold between $215,000 to $225,000 and the fifth went for $235,000, you'd be wise to keep the asking price under $225,000.

Ultra-fine-tune your price to the nearest $10,000 quantum. This is the moment of truth. Now you must decide on the precise point between $215,000 and $225,000 to put your price. If the actual prices of comparable houses that sold under $225,000 were $215,000, $217,500, $219,500, and $222,000, three out of four sales point toward an asking price under $220,000.

Recognizing quantum-pricing finesse points

If you seriously want to sell quickly for top dollar, don't put your asking price in the next higher quantum in order to give yourself "room to negotiate." Here's why:

It takes courage to price your house a hair below the nearest price quantum (instead of above the quantum, so you have room to negotiate). For example, suppose that the comps indicate a probable sale near $150,000. A $149,500 asking price may create enough buyer excitement to generate multiple purchase offers that push your sale price over the asking price. Price your property at $169,500 to give yourself a $20,000 negotiating cushion, and your house is just another yawner.

Computers: Almost all agents now use computers tied to their multiple listing service's database to perform property searches. For example, a buyer decides on a neighborhood and asks the agent for a list of homes with the following features: three bedrooms, two-and-a-half baths, a two-car garage, and an asking price of $150,000 or less. Per the agent's request, the MLS computer spews out listings that meet these conditions. The computer isn't smart enough to make allowances for property with negotiating room in its price. If your house is listed at $169,500 or even $151,500, it won't be on the printout, and buyers won't know it exists.

True, some agents show buyers higher-priced houses they think will sell in the buyers' price range because the asking prices are "soft." Smart agents, however, know that buyers are deeply concerned about being manipulated into purchasing a more costly house. These agents won't show buyers property over the stated price limit until the buyers have seen every house on the market in their specified price range and request to see more expensive homes. Less buyer exposure to your house means less buyer competition for it. Less competition translates into a longer time on the market -- and usually a lower sale price, to boot. High sale prices come from spirited buyer competition.

Conditioning: Whether people are buying houses or blouses, everyone loves a bargain. Believe it or not, $9.95 advertising is mighty effective. A nickel ain't much, but most folks are well-conditioned to think that $9.95 is much cheaper than $10. Subconsciously, $149,500 is more exciting than $150,000, and $99,950 sounds like a much better deal than $100,000. Don't try to buck a lifetime of Pavlovian conditioning; smart pricing makes buyers drool.