Priceless psychology- pricing your home
I'm reading this book, Priceless: The Myth of Fair Value (and How to Take Advantage of It) by William Poundstone, and it had an interesting idea about how one could price a home to maximize the value of it- list a property for a short time like a few days at a very high price, and then cut it to a more reasonable asking price. Thus, the listing can honestly mention the original price, with that original listing price acting as an anchor.
The book explains how anchoring, where the first information or number you hear biases your subsequent judgments- even if you adjust away your the anchor, your judgement is still biased around that anchor.
The book delves into and explains the latest research on the topic of pricing, showing how people are unable to estimate 'fair' prices accurately. Instead, people are strongly influenced by the unconscious, irrational, and politically incorrect. Even when people are aware of these tricks, they're still biased by them.
In a chapter about real estate prices, the book talks about a real estate study that examined whether anchoring could affect the perceived number of actual houses on the market.
They had lay people and real estate agents go into the same house that was for sale, and were given all the info you'd have when trying to determine the value of a home- a list of comps for nearby homes that sold, MLS sheet for house and nearby homes for sale, etc..
But, they varied the listing price they told the lay people and agents, and that affected the perceived value and estimated purchasing price for the exact same home.
Listing Price Estimated Purchase Price(average)
$139,000 $123, 785
The higher the listing price for the same house, the higher the perceived value for the home even though everybody had the same comps and sales information.
By listing a home at an artificially higher listing price, you've increased the perceived value for that home. One of the experimenters explained, "when the price was higher, we tended to focus on the things that made it a high priced house, and if it was lower, we tended to foucs on the things that explained why the price was lower."
And, by then slashing the price to the price you really wanted after a few days, it also takes advantage of how people love 'deals' and 'sales' even if the price isn't really any lower.
The book also talks about studies where catalogs sold the exact same item, where a item that supposedly retailed for $50 but was on 'sale' for $42 outsold the exact same item that was priced for $40 but wasn't on 'sale'.
Since this pricing idea theoretically seems it'd work, are there any practical reasons why sellers don't do something like that more often? I understand that there's a trade-off between asking price and time on the market, but you'd only...