Important Tried & True Home Pricing Principles to keep in mind when preparing to sell your home:

Here are some tried and true home pricing principles/insights/guidelines that never go out of date.  These principles are from an article by Tom McCarthy, who was president of Laura McCarthy Inc., which is St. Louis area’s most sophisticated real estate marketing organization.

  1. In the absence of proper pricing, no combination of promotion, home preparation, or improvement is likely to produce a reasonable sale.
  2. As a rule of thumb, a successful marketing strategy should generate an accepted sale contract within 30 days at an amount equal to or better than 95 percent of the price being asked.
  3. Over-pricing a home is the most serious mistake commonly made in marketing residential real estate. A seller loses all the advantages briefly enjoyed when a new and exciting property is brought to market.
  4. Statistically, the strongest contracts for the seller are those written early in the marketing effort.
  5. Longer time on market generally works contrary to an owner’s best interest. A home newly listed today carries with it a strong sense of urgency; one that has been on the market unsold for months does not.
  6. The objective of each seller’s home marketing strategy should be to develop a strong and immediate response from virtually every qualified prospect. It is competition  among the buyers – the fear of losing a valuable opportunity to someone else – that prompts the very best offers.
  7. From an owner’s perspective, the ideal buyer will leave a listed property focused on the answer to a single question: “What do I have to do to get this home?”
  8. Less ideal is the buyer who asks: “I wonder what the seller is willing to accept?”
  9. Real estate agents typically do not show homes priced beyond the upper limits of their buyer’s price range. To do so would jeopardize their hard-earned credibility.
  10. The market for a particular property is defined by its asking price. Price determines who comes to see what is available for sale.  A home priced too high tends to scare off the very buyers most likely to want it.
  11. Never underestimate the importance of good timing. The price paid for real estate is greatly affected by the calendar, by supply and demand.
  12. A one percent increase in interest rates means a loss of ten percent in your purchasing power.


Swarm Theory: How Honeybees develop a “perception of value”

Based on an article in National Geographic Magazine

A biologist at Cornell University has been looking into the uncanny ability of honeybees to make good decisions.  More specifically, scientists have been studying bees to see how they choose a new home.  In late spring, when a hive gets too crowded, a colony normally splits, and the queen, some drones, and about half the workers fly a short distance to cluster on a tree branch.  There the bees wait while a small percentage of them go searching for new real estate. (bee buyers!)

Ideally, the site (or perfect house) will be a cavity in a tree, well off the ground, with a small entrance hole facing south, and lots of room inside for the bee colony and honey.  Once a colony selects a site, it usually won’t move again, so it has to make the right choice.  (emotional purchase?)

In one test, scientists put out five nest boxes, four that weren’t quite big enough and one that was just about perfect.  Scout bees (buyers?) soon appeared at all five.  When they returned to the swarm, each performed a waggle dance urging other scouts to go have a look.   The strength of each dance reflected the scout’s enthusiasm for the site.  After a while, dozens of scouts were dancing their little feet off, some for one site, some for another, and a small cloud of bees was buzzing around each box.

The decisive moment didn’t take place in the main cluster of bees, but out at the boxes, where scouts were building up.  As soon as the number of scouts visible near the entrance to a box reached about 15 – a threshold confirmed by other experiments – the bees at that box sensed that a quorum had been reached, and they returned to the swarm with the news. (Perception of value)

Scouts from the chosen box then spread through the swarm, signaling that it was time to move.  Once all the bees had warmed up, they lifted off for their new home, which, to no one’s surprise, turned out to the be best of the five boxes.  (House with the best amenities?)

The bees’ rules for decision-making – seek a diversity of options, encourage a free competition among ideas, and use an effective mechanism to narrow choices – is very similar to our real estate philosophy… use a marketing committee to provide input on pricing, price the property to create a “perception of value” and use a “delayed showing” to build excitement and maximize showings.

This is also similar to how buyers act… they want to visit all available properties in their price range… weigh the pros and cons of each property… and make a decision based on which house offers the most amenities for the price… their “perception of value”.