The 25 – 50 – 100 Rule of Searching

The 25-50-100 Rule of Searching

You call me up to list your home. I jettison on over and accidentally hit the gas and ram into your beautiful automobile at full speed. Your vehicle slowly catches on fire and boom – bursts into flames.

Besides not hiring me, you now need a new car!

Are you getting the same one?
Maybe something different?
Same color?
Lease or Buy?
What lease number or purchase price will you search up to? Seriously, what is your top number that you would consider?

The last question is the real important question, and it relates to real estate pricing perfectly. (Continue on to See Why)

I often go through this ridiculous story with clients because every online search for a product has a price search like this. Most likely you ended your search with a number like $40,000 or $45,000 or $75,000 or $100,000. If it was a lease it would be like $850 a month or $1200 a month. You didn’t enter $38,500 for a sale or $2670 for a lease.

Other products are the same. Go to Google Purchase or Amazon Purchase. They give you round numbers to choose from. Pillows up to $40 or $90. Foyer tables under $1,000 or over $1,000.

In real estate it works the following way for almost everyone.
• Rhythms of $25,000 for up to $350,000
Think $275,000 or $300,000 or $325,000 or $350,000

• Rhythms of $50,000 from $350,000- $750,000
• Rhythms of $100,000 from $800,000 to $1,500,000
• Rhythms of $250,000 from $1,500,000 up to $3,000,000
• Rhythms of $500,000 from $3,000,000 to $7,000,000

• And then it continues to expand. From $7m it will jump to $8m

If you are a Seller the reason understanding this is so critical is that if you price too high, your buyer will end up in the wrong parking lot. Since most every Buyer uses this formula to search for product, if you price to high, you will find you have the wrong buyer looking at your home.

To go back to the car example, if you searched up to $50,000 and a car was for sale at $51,000, the $51,000 car would never show up in the search. Same for a pillow. If the reseller of a pillow, priced it at $92 and a cutoff in google was $90, than no one would see the pillow priced at $92 because the computer stopped in at $90 per your instructions. In retail settings a good show salesperson can flip a buyer into a more expensive shoe if appropriate. Not so with a maximum search on the computer. Your home is literally invisible if you price it one cent over the threshold.

So, the Seller should always price to the highest number within the category. If you have a home that with proper marketing is valued at $525-$550,000, then go to the highest number which is $550,000. However, price it once penny over that at $500,001 and you would have drastically limited the amount of showings.

Every buyer who was searching up to $550,000 would have seen it. But the next stop is $600,000 using the rhythm of $50,000 rule and now the $500,001 price is in competition with Buyers who can afford up to $600,000 and that product is most likely better than your home valued at $525,000-$550,000.

In this situation, your high price is just helping sell someone else’s home. It was better to price it at $550,000 and capture every buyer stopping their search at exactly $550,000.

Try Searching the MLS. Maximum prices are in rhythms of $25,000/$50,000 or $100,000. So, remember to price at the highest price within each parameter. Avoid oddball prices as you don’t need the negotiation room. You just always want to be at the top of each pricing rhythm.

Jeff Lichtenstein is owner and broker of Echo Fine Properties, a luxury real estate brokerage selling real estate in Jupiter and homes in Palm Beach Gardens, Florida. He has 20 years of real estate experience, has closed over a 1,000 transactions, and manages over 50 agents in a non-traditional model of real estate that mimics a traditional business model. Some publications he has been quoted in.

Feel free to ask him a question directly at [email protected].