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 No matter how slow the housing market might seem, it's always possible to sell your home. And if anyone ever tells you that they can't sell their home, then they're only telling you half the story.
In this article, we're going to explain how any home can be sold; even in a slow real estate market. We're going to talk about the law of supply and demand - and how this straightforward economic relationship can affect home prices. We're also going to talk about how to go about setting a home's price so that the chances of it selling are greater.
Home Prices
There is no doubt that some housing markets are "hotter" than other markets. For example, homes might start selling quickly if new jobs are created, as was the case in the Las Vegas housing market. But behind all of the hype that you might hear from a real estate agent, stands a very simple rule of thumb that can explain why homes are moving faster in one area of the country versus another.
Supply and Demand
Fundamentally, homes will sell more quickly in an area where buyers are creating more demand than sellers can supply. Likewise, homes will sell more slowly when sellers are creating a larger supply of homes than buyers are willing to purchase. The economic theory known as the law of supply and demand tells us that quantity supplied is related to price paid.
This theory also tells us that that equilibrium prices occur where demand equals supply. If homes in a certain area are taking too long to sell, then their price is above this equalibrium point and there will be a surplus of homes in that market.
Home Pricing Example
In 2007, the average new home sold in just about six months. So let's say a homeowner has been trying to sell their home for a year at $500,000 and it's still not sold. What does the law of supply and demand tell us? The home's price is higher than buyers are willing to pay.
But what if that same homeowner were to put their home on the market for just $1.00? Chances are the house would sell immediately - demand is very high for that home at that price. From this example we can conclude that the right price (equilibrium price) for the home is somewhere between $500,000 (too high) and $1.00 (too low).
This example might seem extreme, but many homeowners refuse to accept the fact that the price they're asking for their home is too high. For a variety of reasons, demand has diminished for homes in their real estate market, and sellers are refusing to price their homes at the point buyer's are willing to pay.
Pricing a Home to Sell
Now that we have a greater understanding of why some housing markets might slow down, it's time to turn our attention to pricing strategies. By employing some of the simple tactics we're going to describe, your chances of selling a home should increase.
Homes Selling for $499,999 versus $500,000
Have you ever noticed that many products sold via television are priced at $19.99? Even though this price is just a penny shy of $20.00, marketers know that buyers' perceptions are influenced by the way we read words and numbers - from left to right.
In the example above, the reader will focus-in on the first digit of each price point - $19.99 and $20.00 - and since the number 1 is a smaller than the number 2, a buyer perceives a greater savings than really exists. This is referred to as the left digit effect.
This same rule applies when you're trying to sell your house. Homes priced at $499,999 versus $500,000 will be perceived as being less expensive than the actual dollar difference in price.
Status versus Bargains
Another lesson that marketers have learned through studies is that consumers associate "exact" numbers with bargains while rounded numbers convey a sense of status. Homeowners can use this knowledge when they're deciding how to position their homes in the real estate marketplace.
For example, let's say you're selling a home you believe is valued slightly under $1,000,000. If you were looking to position this home as an exclusive or prestigious home, then you'd want to use a rounded value such as $980,000.
If you were looking to position the home as a "bargain," then you would want to use a more exact number such as $979,235. By using a more exact selling value, consumers believe you've put a lot of thought into the selling price of the home.
Lowering Home Prices
Unfortunately, it's often necessary to drop the price of a home to spark a buyer's interest. Our final tip in this publication dealing with pricing a home to sell, explains how to go about dropping the price of a home after it has been for sale too long.
Once again, we're going to refer to human behavior and how a buyer might react to a change in a home's selling price. Here we know that if a drop in value is easy to calculate, then the decrease is perceived as being larger than if the value is difficult to calculate.
For example, if a seller were to drop a home's selling price from $979,235 to $971,128 a buyer might perceive this as a small discount from the original selling price. However, if the seller were to drop the home's selling price from $979,235 to $971,235, then buyers would be expected to perceive this as a larger drop in price.
About the Author - Selling Your Home
Copyright © 2008 Money-Zine.com
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