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The Real Estate Numbers Game – How Do Agents Price Their Properties?

by Peter Thomas Ricci

real-estate-numbers-game-trulia-jed-kolko-asking-prices-housing-patterns

Are there patterns in how real estate agents price their properties? A new Trulia study delves in to the real estate numbers game, and finds some interesting things!

By Peter Ricci

The real estate numbers game, as any agent knows, is not always the most fun of activities. Indeed, pricing a home is a delicate balancing act between accurately valuing the home, attracting potential homebuyers and, of course, appeasing the seller.

Given the underlying uniqueness of every property, then, you would think that prices would differ across the country, but a very interesting study by the folks at Trulia has found that asking prices in the U.S. follow a distinct set of patterns – some of which that are flat-out intriguing.

The Psychology of The Number “9”

A big part of Trulia’s research revolved around the number 9, a number that, Trulia’s Jed Kolko wrote, is extremely common in everyday prices, from groceries, to electronics, to furniture. The most common explanation for 9’s preponderance is how it plays with human perception; after all, $39.99, on first glance, looks much more appealing than $40. But does that numbers game extend to real estate? Here’s what Trulia found:

  • The vast majority of home prices end in zero, but the most common last non-zero digit (meaning, the last digit in a home price that is not zero) is the number 9. Fifty-three percent of listings, in fact, use 9 as that last non-zero digit, and 27 percent use the number “5,” a similarly perceptive numeral. Between the other Arabic numbers, none was used more than 4 percent of the time.
  • It mattered a great deal, though, on what kind of home was being sold. Just 25 percent of luxury homes (those listed for $1 million or more) used the number-nine strategy, but for homes that reduced their price, 9 was employed 54 percent of the time for the last non-zero digit, and probably to create the impression of a better price.

The Real Estate Numbers Game – 13 and 666

Here are a couple other findings from Trulia’s report, one of which is extremely intriguing:

  • Real estate agents, it seems, have a severe case of triskaidekaphobia, or, the fear of the number 13. For some strange reason, the number 13 is 13 percent less likely to appear in listings than the number 12, and 17 percent less likely than the number 14. Perhaps they play “Friday the 13th” during real estate seminars to get the point across?
  • The Bible Belt is a strongly Baptist region of the U.S., and it well known for its religious conviction. Would you believe, then, that 316 and 666 – aka, the 316 of John 3:16 and the 666 of the devil – appear in the Bible Belt far more often than other places in the U.S.? For 316, the sequence appears 27 percent more often in the Bible Belt, and though 666 is rare in real estate, showing up in only 1 out of every 10,000 asking prices, it shows up 39 percent more often in the Belt.

All in all, very interesting stuff. For more numbers games from Trulia, check out this infographic they put together:

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Comments

  • We encourage all of our listing clients to price ending in zeros. The price points in sales are too high to compare to a ‘loss leader”, such as 1 gallon of milk, $1.99.

    With Eldorrado Chicago Real Estate listing properties anywhere from $200,000 to $1,000,000+, it seems very trivial to use the 9, and we point this out to the client.

    When dealing with thousands, tens of thousands, and hundreds of thousands of dollars, the 9 typically gets immediately eliminated from the buyer’s prospective. When it comes to negotiating, a property listed at $999,900, still translates to $999,000 for most buyers.

    Ultimately the pricing is our Seller’s decision, and we can only provide our professional insight and recommendations.

    In terms of 666, although a very strong Evangelical Christian myself, culturally in the US, even in Chicago, it is very much avoided in pricing and, when possible, even other applications.

    A perfect case in point is found in this bit of Chicago trivia. I can recall when Playboy enterprises moved their headquarters from the Palmolive building to 666 N. Lake Shore Drive and part of their lease negotiations included getting the address of the building changed to 680 N. Lake Shore Drive which they were successful in doing.

    Alexis Eldorrado
    Managing Broker
    http://www.Facebook.com/ChicagoRealEstateBroker

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