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Left-Most Digit on Home's Asking Price Matters Most

The best technique for pricing a home when listing it for sale is setting the asking price just below a round number, according to recent research published by the Journal of Housing Research.

While residential real estate agents widely disagree on the appropriate pricing strategy to use when listing residential real estate for sale, the researchers found that homebuyers more often prefer homes priced using a 鈥渏ust below鈥 pricing strategy. This preference allows sellers to list their home for a higher initial listing price.


By james hellegaard | 8/10/2016

The best technique for pricing a home when listing it for sale is setting the asking price just below a round number, according to recent research published by the 鈥 an official publication of the (ARES).

鈥淭hese findings will help real estate brokers and sellers of homes develop more informed listing and marketing strategies to better suit sellers鈥 needs,鈥 said , Ph.D., ARES publication director, real estate economist at and co-developer of the . 鈥淭he results of this study take a lot of guess work out of the marketing of homes for real estate brokers.鈥

The study looked at 1,000 buyers in Virginia considering a pool of more than 370,000 listings.聽The researchers were able to determine the impact of 鈥渞ounded pricing鈥 listing strategies versus 鈥渏ust below pricing鈥 listing strategies.聽

鈥淥ur study suggests that by using the just below pricing strategy sellers can price their home slightly higher without driving away potential buyers,鈥 said , Ph.D., of Florida International University, who conducted the study with , Ph.D., of The College of William & Mary. 鈥淎s a result, they end up selling their house for more.鈥

How does dropping your asking price ever so slightly impact the final outcome?聽

鈥淥n average, buyers are more attracted to a house priced at $199,000 than to a house priced at $200,000 and it appears that 鈥榡ust below鈥 pricing works out favorably for sellers in terms of their bottom line,鈥 Beracha explained. 鈥淏ased on our research, the 鈥榡ust below鈥 pricing strategy yields a selling price that is, on average, roughly 2.5 to 3 percent higher, $5,000 to $6,000 on a $200,000 house, compared with a rounded pricing listing strategy.鈥

While residential real estate agents widely disagree on the appropriate pricing strategy to use when listing residential real estate for sale, the researchers found that homebuyers more often prefer homes priced using a 鈥渏ust below鈥 pricing strategy. This preference allows sellers to list their home for a higher initial listing price.

On the other hand, due to the demand effect, rounded priced homes typically have shorter time on the market and a lower discount relative to listing price. Their findings suggest that sellers鈥 ability to set higher listing prices for properties using a 鈥渏ust below鈥 pricing strategy outweighs the lower discount and shorter time on the market associated with similar rounded priced strategy homes.

鈥淲e tested the age-old debate concerning the best technique to price a home when listing it for sale,鈥 Seiler said. 鈥淲e find that using a price just below a round number works best, particularly in connection to the left-most digit in the price. So, $199,000 works better than $200,000.鈥

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