By Kimberly Blanton, Globe Staff | July 17, 2006
Home sellers are learning what any retailer, from Wal-Mart to the owner of the corner gas station, already knows: Low prices are one of the surest ways to beat the competition.
Coldwell Banker Residential Brokerage, Massachusetts' largest real estate firm with more than 3,500 agents, is coaching agents on how to persuade clients to list their homes at an asking price that undercuts those of comparable ones on the market.
The hope is low prices will attract more prospective buyers, leading to faster sales. Other real estate agents in the Boston area report success with similar strategies in a housing market with an unprecedented glut of properties for sale.
Called "drama pricing" or "energy pricing," it is a drastic measure for difficult times. And it seems to run counter to the conventional strategy of selling your home for the highest price possible.
Buyers are "overloaded" with options and "only respond when they see a perception of value," said Angela Stamoulos, who teaches Coldwell Banker's course on this pricing technique, which the firm rolled out this spring in Connecticut and last month in Massachusetts.
By grabbing buyers' attention, she said, "the true market value of the property comes to fruition."
While the real estate industry has been reluctant to publicly acknowledge a downturn, that's not what they are telling their clients.
After Robert Picciano's employer, EMC Corp., relocated him to Connecticut, he and his wife wanted to sell their two-bedroom condominium in Walpole. They estimated its value at $360,000.
But Coldwell Banker agent Robin Wish laid out the facts on how tough it would be to sell: five other active condo listings in their complex -- all 1,488 square feet, like Picciano's -- were on the market for $329,900 to $359,900. Wish suggested $342,500, slightly undercutting another two-bedroom with extras her clients didn't have, a fireplace and extra bath.
"We were disappointed," Jennifer Picciano, Robert's wife, said.
Within four hours of their May open house, the couple received an offer at the asking price -- within the week, a second offer, slightly smaller, came in.
Their reaction to the quick sale? "Shock," Robert Picciano said. They expect to close July 31 and are buying a home in Fairfield, Conn.
Four of the other condos haven't sold, Wish said, including one on the market since April with more amenities. The price started at $364,900, and has been cut nine times, to $319,900, according to the listing.
"The point is if you start too high, buyers forget about your property -- it doesn't matter how beautiful it is," said Wish.
While it may seem obvious a house will sell faster at a lower price, Coldwell Banker's efforts reflect a sea change in the market's psychology. During years of record house-price gains in Massachusetts, a prospective seller would examine "comps" -- reports prepared by agents listing comparable houses that have sold in the prior six to 12 months -- and then determine how much more he could get for his home.
Today, what's important is what is not selling. Drama pricing focuses on what buyers see on the market, forcing sellers to look at the prices of active listings.
"It's another indication that it's clearly a buyers' market," said Timothy Warren Jr., chief executive of The Warren Group, a Boston real estate research and publishing firm that tracks the market. "There's a lot of stuff on the market, and it's going to have downward pressure on prices."
The median price of a single-family house in Massachusetts has declined 4 percent over the past year, to $331,000 in May, and sales volume has fallen five consecutive months.
The traditional strategy of incremental reductions in asking prices can frustrate sellers because properties grow stale and buyers lose interest. In 2005 and 2006, prices were reduced on nearly half of all homes listed in eastern Massachusetts from Jan. 1 through July 12, up from 41 percent during the same period in 2004, according to MLS Property Information Network, the primary database for realtor listings. Yet, a house sits, on average, on the market 97 days, up from 85 days in 2004.
Coldwell Banker's course "is formalizing something that's happening anyway" in Massachusetts' declining market, said Sue Hawkes, managing director of The Collaborative Companies, a Boston real estate marketing firm. The effort may help push the market's inevitable evolution "along faster and will give it impetus," she said.
Janice Hoffman created a buzz in Cambridge by using drama pricing to sell an eight-room Victorian, which sold for $185,000 above the $1.1 million asking price. How so? She attracted 130 people to the April 9 open house because the asking price was at the low end of similar houses in the Cambridge market. Her client received nine offers that ignited a bidding war.
Prices should be set "so that people who can afford it will step up," said Hoffman, an agent for William Raveis Real Estate in Newton.
Prudential Maxfield & Co. in Boston also is tinkering with asking prices with the same goal to attract more bidders. Instead of a single asking price, owner John Maxfield places a range on a listing, say, $469,000 to $529,000. Sellers were hesitant to try this when the firm introduced the idea in 1999, but the slowdown has made them more open to the tactic.
But drama pricing can't guarantee a sale. Kathleen Horigan is selling a tidy four-bedroom house in North Attleborough she purchased eight years ago for her sister and family. A few weeks after they moved out in February, Horigan listed the house for $319,900. There were no offers.
Her agent suggested drama pricing, and Horigan dropped the price to $279,900. The timing of her July 2 open house was bad because it fell close to the July 4th holiday. Two couples came, though one may place a bid.
Horigan, a free lance public relations consultant, again lowered her price, by $400, and threw in a $3,000 gasoline gift card as a buyer incentive. Nine more people have looked at the house -- "unheard of in this market," she said. While she was optimistic last week she'd receive an offer over the weekend, none came.
During the selling process, she has gained new insight into Massachusetts' housing market.
"It's not a buyer's market," she said. "It's a procrastinator's market."
Kimberly Blanton can be reached at
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