Price Fixing

“My husband is just too hard-headed for our own good!” said Rhea Gretta, recent home seller. “We had equity in our house, and it literally slipped through our fingers.”

Ms. Gretta spoke at the recent Science and Psychology of Selling Symposium. She and Mr. Gretta were invited as examples of sellers who made wrong decisions in marketing and selling their home.

Mr. Gretta declined the invitation.

“And now we’re known as Three-Steppers!” she said.

“Three-Steppers”, explained Dr. U.N. Real, the psychologist leading the Symposium, “are sellers who make the three most common mistakes in the science of home selling.”

The three steps referred to by Dr. Real are, one: pricing too high; two: reducing the price insignificantly; and three: over-negotiating offers.

Ms. Gretta admitted that she and Mr. Gretta had been cautioned by their Realtor about the dangers of over-pricing. He showed them the sales prices of homes similar to theirs, and recommended listing the house at $389,000.

“But we listed at $429,000 instead, said Ms. Gretta. “My husband just wouldn’t listen. He wanted to get everything back we ever put into the house.”

“Experts call this syndrome the ‘Endowment Effect’”, interjected Dr. Real, “We tend to put more value on things simply because we own and care for them, so we over-price them.”

Buyers, however, are reluctant to offer on over-priced property. They perceive the seller as being unreasonable, and unwilling to sell at fair market value.

Dr. Real then explained step two.

“Token price reductions are meaningless,” he said. “A price reduction should go below the next significant price point to open the property to a new category of buyers.”

The Gretta’s Realtor had repeatedly urged them to get their price below the $400,000 barrier, but they only agreed to small incremental reductions. After three months on the market, and four price reductions later, they finally reduced to $399,000. At that point, they received an offer.

Dr. Real then spoke about step three, over-negotiating.

“Tough negotiators who overplay their hand, lose in the end,” he said.

The Grettas received an offer of $375,000. “My husband insisted on counter-offering back and forth, said Ms. Gretta, “and we lost the buyer to another house. We finally sold for $355,000 after six months.”

Ms. Gretta raised her voice: “My husband just couldn’t get it through his thick skull …!” Dr. Real held up his hand in “stop” fashion, silencing Ms. Gretta.

Dr. Real then said “Now Ms. Gretta, our study of your case indicates that you, not just your husband, were instrumental in Three-Stepping your home, resulting in a loss of over $30,000.”

“Wasn’t it you, in fact, who refused to list at the recommended price?” he asked.

“Well, I, umm……” Ms. Gretta’s explanation trailed off.

Dr. Real’s voice grew louder and sterner. “And did you not, in fact, urge your husband to keep countering your first buyers, Ms. Gretta?”

“Well I couldn’t let my husband just give our home away!” she snapped. “I mean……………………”