Online Marketing: Real Estate Pricing
Article by Austin online marketing company Semantic Advantage, Inc. -- Copyright (c) 2011
Traditional Marketing vs. Online Marketing in Real Estate
In many ways online marketing is simply traditional marketing applied to new media and communications channels. But the Internet marketing environment for Real Estate has requirements and characteristics that sometimes require a special approach. The most obvious of these is the rapid pace and expected short response times in online marketing. Internet marketing technology enables agencies and clients to always be available and communicate instantly – and clients have come to expect this from Real Estate agents and brokers.
A more subtle distinction between traditional marketing and online marketing occurs in the area of pricing. In real estate marketing, pricing is most often determined by reviewing sales and current listings of comparable properties. Then the client and agent commonly agree to set the price just below the nearest ‘round number’. This is called Psychological Pricing, based on the concept that a buyer will have much less ‘sticker shock’ with a price of $999,950 than if it were an even $1,000,000 -- even though the difference is only $50.
For completeness we should mention that some buyers don’t want to pay less than a certain figure. Most often this is because they have sold a house for that price (and want to avoid capital gains tax); but this also may be due to the concept of Giffen Goods, where a buyer equates price to value or prestige. Even in today’s difficult real estate market, a mansion in a million dollar neighborhood listed for $700K could be harder to sell than if it were listed at $950K.
Psychological Pricing has the greatest impact near ‘round numbers’ – even hundreds of thousands or millions. Experienced realtors know that buyers who might balk at paying $500,000 (or $5,000,000) for a house are much more receptive to $499,900 (or $4,999,500). In traditional marketing, psychological pricing works -- but this can be a problem in online marketing.
Listing Price Ranges for Internet Marketing Optimization
Many real estate agency websites host MLS listings, offering prospective clients the ability to search for real estate based on the type of property (house, condo, acreage, lot, etc.), geographic area (or zip code or school district), number of bedrooms, baths and garages – and a price range. The way these price ranges are set up and the exact price of the listing can have a big impact on how many people see the listing when they search.
Traditional price ranges have one round number endpoint – either the low or the high end of the range. So you would have either (0-99,999), (100,000-199,999), (200,000-299,999), etc. or (1-100,000), (100,001-200,000), (200,001-300,000). In either case, the ranges do not overlap.
A better approach is to use overlapping ranges. The overlap can be as little as a dollar, i.e. (0-100,000), (100,000-200,00), (200,000-300,000), etc. or a larger amount, say 10%: (0-100,000), (90,000-110,000), (100,000-200,000), (180,000-220,000), (200,000-300,000), etc. Properties priced in the overlap zone will appear in search results about twice as often!
In the example above, a house listed at $205K will appear in searches for (180,000-220,000) and (200,000-300,000). More appearances in the search results mean more opportunities to sell the property.
An alternative method of producing this effect is to program the real estate search engine to return properties that are priced between 10% below the low price specified and 10% above the high price specified.
Pricing Real Estate Listings -- Online Marketing Strategy
Most importantly, you want to price your listings to fall in one of these overlap zones. Since most real estate websites offer price ranges with only a one-dollar overlap, this means it’s best to price a property exactly at the round number common to adjacent price ranges.
If the comps on a property come out at $255,000 and the price ranges are (200,000-250,000) and (250,000-300,000), it will be better for your client if the property is listed at $250,000. This is why Psychological Pricing doesn’t work for online listings – $499,995 is rarely in two price intervals.
Conclusions and Recommendations for Internet Marketing and Pricing
Real estate buyers frequently search local MLS listings or other real estate-related online marketing sites to get an idea of what homes are available in a specific neighborhood. Many agency websites include the ability to sort and sift the MLS listings by price range, geographical area or zip code, lot size, # of bedrooms, # of baths, # of garages, and other home amenities. Having this feature on your real estate website can be a good way to attract buyers – and sellers.
Avoid Psychological Pricing for Online Marketing.
Set online real estate listing prices at a 'round number' close to the value suggested by the comps.
For the MLS listings search on your real estate website, use pricing intervals that overlap -- with each overlap including a ‘round number’.
Austin Online Marketing Company – Semantic Advantage, Inc.
Specializing in Internet marketing for Central Texas businesses, Semantic Advantage offers search engine optimization services, search engine marketing campaigns and social media marketing services for Austin area corporations and small businesses. If you’re unhappy with your current online marketing results, visit our website to learn more about our SEO Services and Social Marketing programs.