Friday, November 23, 2018

Really? A $1 Price Reduction?

Price changes are often a part of marketing a property. However, there is supposed to be a solid reason for showing a price change which helps agents and potential buyers to consider a property they might not have to that point.

Reasons for a price reduction for a home are often, and are supposed to be, well thought out, even if they are only for a few thousand dollars.

For example, let's take a house initially priced at $207,000. Part of the strategy for this price could be that someone searching in the $200,000 to $225,000 range from "low to high" would see this property ahead of similar homes priced closer to $225,000.

If this price point is not successful after several weeks, the listing agent is likely to reduce it by $8,000 to $10,000 in order to show it listed for under $199,999. The reasoning is that by doing so, this house would now appear in searches of under $200,000 instead of over. This reduction of less than 5% is designed to open up the marketing potential to a "new" group of potential buyers.

However, the amount of a price reduction also plays a factor. Think of those times you are in the grocery store and see a "Sale" sticker on an item you regularly purchase. Then you see that the item you usually purchase for $1.79 is on "Sale" for $1.69. Saving ten or twenty cents on one or two of the items doesn't thrill you to the point of calling your friends to let them know of this sale.

Over the course of Thanksgiving day, this unit in downtown Chicago, which has been on the market since August (3 months earlier) showed up on the "Price Reduction" list the next morning. The fact that the next morning happened to be Black Friday, the biggest sale day of the year, seemed like a solid marketing approach, since properties are for sale, too.

Imagine the shock upon discovering that this home was reduced by a grand total of (Are you ready for this?) $1.00. Yes, all the way down from $180,000 to $179,999. 

Oddly enough, despite the Black Friday approach, only one other downtown Chicago property showed a price reduction on Thanksgiving. However, the other listing, which is located a few blocks from the $1 reduction, posted a $40,000 price reduction.

In other words, the agent representing the $1 price reduction took a good idea (a Black Friday reduction) and wasted the time of other agents and potential buyers. The savvy agents are likely to remember this agent and might not bother to look at his future price reductions. At the same time, it's hard to believe that the seller is jumping for joy about the prospect of chipping in $1 toward getting their property sold.

Their $1 didn't even buy any favorable publicity.

(Here is the link to the listing)

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