Psychology of Price Reductions

S

SacRenter_IHB

New member
<p>For the past few months I've been monitoring a small planned community here in Sacramento. In the time I've been tracking this community I've noticed that most reductions are done 1 or 2% at a time. It is rare that I've seen a reduction of 5% or more. Meanwhile out of a group of approx 50 homes at least 10 of them have been listed long enough to have been reduced more than 10%. A handful are well into the 20% reduction range. </p>

<p>This has me wondering about the psychology of reducing the price. In a hot market do stagnant properties see increased traffic with a 1% reduction? Why would a seller think that 1 or 2% reductions would help sell their home? </p>

<p>I'm also wondering about the times a house suddenly goes from a number like $444,900 down to $424,823. Where do sellers get these crazy numbers? </p>

<p>This isn't meant to be a sarcastic, bash the seller thread. As someone who hopes to begin making offers within the next 12 months, I'm genuinely curious as to what sellers are thinking. Because honestly - the few times I've seen a house make a SERIOUS price reduction I've been awfully tempted to jump in with an offer. But the all these tiny reductions make me laugh - even when they bring the home into my target price range it makes me NOT want to deal with the seller. Small price reductions actually make me disinclined to make an offer because I don't think they are serious about selling. </p>
 
Part of the reason you see small price reductions is that it "refreshes" the listing as many people do searches based on recent price reductions. One of the reasons they tend to be small is because sellers are greedy and stupid and they don't want to "give it away."
 
If the ppl who are selling now were capable of making smart housing price related calculations they wouldn't be in their house in the first place. Hence the glut of idiotards posting nonsensical prices.
 
Because they know the buyer would come in with an even lower bid, so they don't want to scuttle their initial price point too much.





I sold a condo in Placentia in 2006, my initial asking price was $420k and we lowered it to $410k. Buyer came in and offered $390k cash and I accepted it. Had I asked for $390k instead, I'd imagine the buyer would've came in with an even lower bid.





The condo that I sold looked somewhat like this one:


http://www.socalmls-homes.com/Listing/ListingDetail.aspx?Listing=27399997





Funny thing is the builder was same as Oak Park in Oak Creek (William Lyon). So when I moved from Irvine to Placentia in 2001 or 2002, it felt like I was moving from one room to another. Even the door knobs and bathroom fixtures were alike. I could've swore they gave me the exact same crappy sliding door too.



 
<p>I think it is the same mentality why people chose to price their house higher than their neighbors. </p>

<p>IR did a great job profiling this comparing the two Triple Leaf houses where the inferior home was priced $300K more than the better house. What the heck is the first seller thinking? Do not know. . . </p>
 
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