I ran across an interesting article in the Real Estate section of the Wall Street Journal about a strategy for getting people interested in high-end properties. If it doesn’t sell, raise the price.
Pricing homes at the extreme high end of the market is a somewhat subjective, and often irrational, process. Because there are so few similar properties for sale, and the homes are often unique, it’s difficult to set a standard for a pricing scale, brokers say. For a home priced above $30 million, a “reasonable” price may be in the eye of the beholder.
Mark Gainor, a health-care entrepreneur who now runs a financial-services company, bought his Miami Beach home from Jennifer Lopez for $13.9 million in 2005, then spent four years gut-renovating it, including replacing the roof and adding reclaimed wood floors. The 12,152-square-foot home, on 1.2 acres with 200 feet of waterfront overlooking the Miami skyline, has seven bedrooms, a master suite with an office and gym and a closet made from three bedrooms.
By 2010 his children had left for college, so Mr. Gainor and his wife decided to put the home on the market for $29 million. Despite getting little more than a few “lowball” offers, he says, he was convinced the house was worth more, and in 2011 he raised the price to $34 million. He then took the house off the market for a year.
Mr. Gainor says he recently decided to relist the home for $40 million, citing the recent sales in the same price range and an improved market.
Of course, most homes are not so unique that we can price our homes far above comparable properties. But this article does tell us about the psychology of pricing. Most people associate a high price with high quality and a low price with low quality.
I should add that this is also true with stocks. There are innumerable examples of people who would not buy a stock at $10, get interested at $25 and find it irresistible at $50. Instead of following the old maxim or “buy low, sell high” many people manage to do just the opposite. That’s where the advice of an investment professional becomes very valuable.