Bungee Jump pricing

Call it Retail 101: Low prices attract shoppers. Increasingly, real
estate agents are coaching home sellers to list their homes at an
asking price that clearly undercuts the competition. Agents have taken
to calling it ‘drama pricing.’ Others, the ‘eBay effect.’ Either way,
the logic is simple: In a housing market with a glut of properties for
sale, an unusually low price is a surefire way to make your home stand
out and attract more prospective buyers.”

“One homeowner who recently adopted this strategy said her real estate agent referred to it as ‘the bungee jump.’”

“‘You go down and then you get sprung back up,’ said the seller, who
did not want to be identified because the deal has yet to be completed.
‘You would rather have that effect than overpricing your home and
getting no bids at all.’”

“Realtors said many sellers are reluctant to take ‘the bungee jump’
for fear the offers will come in lower, not higher, than the asking
price. Still, with the housing market slack, more and more sellers are
willing to give it a try, Realtors say, particularly those with homes
priced between $500,000 and $1.5 million.”

“‘When buyers see good value, they will come and they will buy with
a sense of urgency,’ said Cara Moxley, a Realtor in Summit. ‘Ultimately
those underpriced homes bring more, even beyond most sellers’
expectations.’”

“‘I take pains to help clients understand that the rationale behind
a lower list price is to maintain a position of negotiating strength as
a seller,’ (realtor) Howard Bunn said. ‘A low price pits the buyers
against one another. They must compete or lose the house. A higher list
price pits the potential buyer against the seller and the seller is
then playing defense, negotiating with a buyer who knows he’s operating
alone and not concerned with the actions of excited other buyers.’”

“Still, Bunn said he always cautions sellers never to list their
home at a price they would be sorry to sell at. As with any real estate
deal, a seller is under no obligation to accept an offer. But once the
asking price has been set, there’s no going back: It won’t help sell a
house to later raise the asking price.”

“‘That kind of pricing is the devil’s workshop and will lead at best to a severe loss of credibility,’ he said.”

“There’s also some risk for a buyer in this situation, Realtors say.
Make sure you’re not the winner who ends up feeling like a loser in the
morning because you overpaid for a property, said Lorrie Cohen, a
broker in West Orange.”

“‘People always want what they can’t have, and they get caught up in
the frenzy of this bidding war and they get the house, but the next day
they wake up and they say, ‘What did I do?’ Cohen said.”

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