The Effect of Listing Price Strategy on Transaction Selling Prices

Posted: 2 Jul 2014

See all articles by Eli Beracha

Eli Beracha

Florida International University

Michael Seiler

College of William and Mary

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 2014

Abstract

While true underlying home values are expected to be randomly distributed, actual residential listing prices tend to be highly clustered. Particularly, more than 75% of the homes in our sample are associated with a round or "just below" round asking price. This study provides a theoretical and empirical examination of how the thousands digit in a home's asking price is related to the final transaction price relative to its true underlying value. Our findings suggest that, on average, homes listed using a "just below" pricing strategy are associated with the greatest discount negotiated relative to the asking price. However, the higher initial degree of list overpricing reflected in "just below" is the most effective pricing strategy for the seller in terms of a greater dollar yield relative to value. These empirical findings have economic significance and are robust across both "buyer" and "seller" housing markets, new versus existing homes, and across multiple home price ranges.

Keywords: List pricing strategies; Time on the market; Residential real estate

Suggested Citation

Beracha, Eli and Seiler, Michael, The Effect of Listing Price Strategy on Transaction Selling Prices (July 1, 2014). Journal of Real Estate Finance and Economics, Vol. 49, No. 2, 2014, Available at SSRN: https://ssrn.com/abstract=2461387

Eli Beracha

Florida International University ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Michael Seiler (Contact Author)

College of William and Mary ( email )

P.O. Box 8795
Williamsburg, VA 23185
United States

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