Residz Team 3 min read
I was looking at the “featured properties” section of Residz today, and did a double take.
Hang on, how much is that property with price expectations of $16000000.00?
For a second I thought it was $160 million for the gorgeous Tudor-style, five-bedroom Toorak home listed by MarshallWhite.
So I stopped what I was doing and looked more closely at this huge number.
Oh, it’s only $16 million, I realised with some relief. Although why I should feel relief at such a princely sum is not certain.
What is certain is that you need a lot of zeros on any number of dollars if you want to buy a house in Australia.
Even if it’s not a home as lovely as this one currently being sold by REA Group Chief Executive Officer Owen Wilson and his wife Liesl, who purchased the property in 2008 for $7.25m.
Currently the median price for an Australian house is over $1200000.00.
When you get so many zeros, your brain gets a bit dizzy. It’s like it wants the number “explained” so you can get your head around it.
I started looking at the psychology of pricing a home. Is it more appealing to the home buyer to purchase a house for $1,750,000, $1750000, $1.75 million, or $1.75M?
For my money, the $1.75M appears cheaper than the other prices. Leaving off the word “million” and inserting a capital “M” is cleverly tricking my brain to register a very small price indeed.
This is a form of “psychological pricing” - a marketing practice based on the theory that certain prices have a psychological impact.
Psychological pricing includes “tricks” such as creating a sense of urgency (One day only! 20% off!), “charm” pricing that knocks a tiny amount off ($599,999), and the appearance of the price ($1750000 vs $1.75M).
Restaurants use this to great effect. Who hasn’t ordered from a menu lately where the pricing of selections looks like this:
According to Price Intelligently, the typeface will likely be reduced in size, and the numbers will not be followed by extra zeroes, for example, “19” instead of “$19.00”.
“There are great reasons for this type of design,” says Price Intelligently.
“Consumers perceive prices that are longer in length to be more costly than those that are shorter, even if the numerical value is the same. This is because, subconsciously, the longer prices take more time to read.”
Taking off the $ sign also works to make the items appear cheaper.
“Not only does it make the pricing longer, [the $ sign] firmly relates the number to consumers’ wallets, exacerbating the pain of parting with their hard-earned cash.”
Of course real estate agents may not list a firm price at all. The property might be up for auction, or the agent will ask for “Expressions of Interest”, “Offer over [price] or “Contact Agent”.
If you can’t get a firm pricing, Reddit user latenightlachyshow suggests this advice:
“If there is a house you like that has no price listed, search the street so it shows up the top of Realestate.com and then play with the price parameters until you find it. E.g. $800-$900k it shows up, $800-$850k it's gone, $850-$900k, it's back, $900-$900, still there? Listed at $900k.”
Otherwise, talk to your local real estate agents, and research other sold prices of similar sized houses in the area.
Residz specialises in all sorts of research that can help renters, buyers and sellers find out information about property.
Image: MarshallWhite