New Redfin Math: $391,534 < $390,000.

I wonder if their rebate works the same way.

Mike good thought,

As a marketing major I know how good the .99 is, but as real estate agents our listings have to be found first they are subjects of a criteria search first not an emotional .99 pricing sign. Most of the time I show that being on an even number will increase your views in the mls $500,000 as oppossed to $499,900 most often will work out better and possibly be pulled up in two searches as the first step in looking at real estate is a ctiteria search not an emotional walk though an isle.

Strange.  I'd like to know who these people are too.  You know, when I see a number like $391,534, I automatically round UP to 392,000 because I don't like comparing "mixed-up" numbers with numbers ending in zero if I'm comparing a long list of numbers.  Even an idiot can see that it is higher.  

I wonder if it has something to do with what a former broker told us years ago.  He really likes to get very precise numbers when doing net sheets for clients.  I mean right down to the dollar and cents. He said that it showed the consumer that you really knew your stuff and had lots of experience that you could do that precise of an "estimate."  Is this the same sort of phenomenon?  I wonder if the $391,534 is perceived as a price set by someone who did their homework and lots of calculations so that they KNOW the house is worth exactly $391,534 rather than something in the neighborhood of $390,000, more or less?  Is the consumer perceiving the $390,000 as a range of potential values up to $395K and therefore, a higher dollar cost potential?  I don't know. This is just strange. I don't have any answers but this is going to bug me.  Thanks Mike.

Mike -

Great post! I agree. At first glance of a string of precise numbers I automatically think "Hey this person is marking it down because they are only looking to cover their costs". COOL!

I think that is more to cater to the three second attention span of the buying public rather than attentive consumers.

You sure this wasn't a miss print... I don't know but I looked at the first 3 digits and there is a 1 instead of a 0 there.  Tells me the 1 is the larger number.  But then again I was not involved in school when they were teaching the new math.  

Jana

I think it's dangerous to underestimate the intelligence of our clients and customers. I wouldn't deal with a sales person who treated me as if I were stupid or thought they needed to resort to "trickery" to get me to purchase something.

I agree with Bob about even numbers (or numbers ending in 5's). People tend to search in zeros and fives ($225K-$250K etc.).

I had a buyer once who had taken one of those classes offered on late night TV about getting rich in real estate. He thought making an offer that was very precise - including cents- would put him at a psychological advantage. It didn't work but gave the listing agent and his seller a good laugh.

Well if the client gets it wrong then their agent would surely get it right.

Redfin must need to put things out there to keep their name in the spotlight.

I expect this extreemly soft market to bring the worst in our industry out in the open by way of desparation. They are usually hiding in the shadows of deceit.

Gail, I think I'm tending to disagree with that, and maybe it's optimism, but I think that this extremely soft market is actually going to bring out the best in our industry - I think the hot market, with everyone jumping on the bandwagon (not just real estate, but the financial industry, home improvement industry, home inspections, title and on and on) that's what brought on the worst.  This is actually a great time for the best to shine a little.

I like your optimism, Cindy. And you're right about the hot market bringing out the worst in all the related industries. I have had many instances with the worst in our industry which has made me a bit cynical. Thanks for accentuating the positive!

Mike, good blog as usual but shorten up the link you have because it is messing up the blog reference with extended length. IMO

Yes that one Mike.

Hey Mike, no one is disputing which price is actually higher, only assessing how home-buyers perceive different asking prices, and what effect this has on the final price. Understanding this effect is helpful to listing clients trying to settle on an asking price for their home.

For example, we've found that a house selling for $349,500 as opposed to $350,000 often actually sells at a higher final price, though its asking price is $500 lower. The effect is small -- a matter of a thousand dollars or so -- but consistent across different markets at different times, studied by different people. It is a fact that we released the results of our study before Professor Manoj did, and that our findings were consistent.

And it's a good point that the consumers whom Professor Manoj evaluated were not the typical home-buyer but college undergraduates. What we did find convincing though is the data on over 50,000 listings sold in Florida, Long Island and Seattle, all of which suggests that homes with an asking price ending in three zeros are more likely to sell at a discount to their list price.

This may be related to Velda Miller's comment that numbers that don't end in zero seem more precise. Professor Manoj speculated that lower-priced items, like a pack of gum, are more often priced without ending zeros, so many consumers associate such prices with lower prices.

The question that Bob Mitchell raises, about prices ending in 9s like $499,990, is separate. This is called charm pricing, and there is an entire branch of economics dedicated to how consumers react to this pricing tactic. To Bob's point, we do think however that home-sellers should consider how consumers search the MLS via websites that filter on price in $25,000 increments:

http://blog.redfin.com/blog/2007/10/549999_is_a_better_price_for_your_home_than_550001_5_better.html

Thanks for the discussion of our findings!

Glenn Kelman, that's all hype, called salesmanship. All those tactics have been around since the cave dwellings. Pick your luck numbers works well with home owners seeking to strike it rich. They seem to think they are playing the lottery. Reductions of a dollar work when the home owner has dug his heels in before the game begins. That will hold the seller to a single dollar amount to keep them in a price range.

I don't know how much you paid for your "study" of the market, but you could have asked anyone of the agent at P2A and gotten the information for free. No magic. You didn't discover anything new here. We still sell houses one at a time. Giving exceptional service to each client, based on their needs. I take it the $25,000 increments are from the Realtor dot com web site. It is a shame you haven't figured out that that web site is no longer the one most buyers search on for a home.

When will you and the Redfin business just admit your just a business model which is made up from many other business models that were already in practice. You're nothing new to real estate, or, any other sales business.

The wheel is still round.

Mr. Kelman, thanks for stopping by and putting yourself on the chopping block :-)

For what it's worth, I do think that your study provides valuable data to the fray - personally, I'm just wondering about your sample size.  I don't see it referred to, other than the data analysis timeframe being two weeks in September - but I'd love to know what we're looking at here in order to gauge extrapolatability (at least a genericized ballpark figure) . . .