raise, drop (rinse), repeat / loft pricing theory, explored

But the next price change for the “$1,000 yoyo” is much easier to predict than for 135 Hudson Street #6F. Dollars to donuts, the price will rise by exactly $1,000 next Monday, or the Monday after that.

motivating buyers, but in what direction?
When I talked about death-by-small-increments (above) I was thinking about the seller (and agent) being motivated to drop the price meaningfully motivate buyers to think now is the right price, while running the foot-shooting risk that buyers will instead conclude if I just wait, the seller will drop again (and again).

Insofar as it went, I still think my analysis is correct – that anyone interested in #6F at 135 Hudson Street may well think that the seller will drop another $50,000 off the price if they don’t sell in a couple of weeks. Instead of (now) waiting, that same buyer might have bid earlier (and higher) if the first price drop had been $150,000.

(Of course this is hypothetical, but my experience tells me I am right; one of the nice things about having a blog is you get to make your own assumptions. Heh-heh)

not motivating, but attracting
I hope we can all agree that it does not matter what the initial price of the “$1,000 yoyo” is for purposes of these discussions. $1k is a per se trivial price change, one that is not going to change anyone’s motivation to buy whether the change is an increase or decrease.

(In fact, the “$1,000 yoyo” is a terrific exemplar for my analysis because the initial asking price was $8,250,000. $1,000 is per se trivial. The “$1,000 yoyo” is Penthouse AB at 120 West 29 Street, by the way, but the same agent has done the same thing at slightly different levels [at plus-or-minus $4,000, $4,000 and $5,000] at three other listings this week.)

lazy agents might notice?
Changing the price of a listing incrementally increases the chances that it will be noticed by an agent who had not noticed it before, which I thought was a stupid reason for making these serial trivial changes.

But maybe that is not the intent.

With the increasing use of websites like StreetEasy or Trulia by buyers, buyers who pay attention to listings with price changes are much more likely to notice the listing for Penthouse AB at 129 West 20 Street with the cheap yoyo pattern than they would if the price had stayed at $8.25mm for three months.

I am not saying that the $8mm buyer will be more likely to bid a yoyo, but s/he might. I may have to re-think this specific scenario.

So long as the yoyo works in both directions, there may be enough value in it to justify keeping two sets of marketing materials (are we in a plus $1k week or a minus $1k week??). But if the price dropped $1,000 a week each and every week, week after week, I personally would suggest waiting for that $8.25mm price to come down. In a year or two you might have a deal….

by the way
I think I have to identify the listing to make a credible point here, but I am not suggesting this agent is doing anything wrong, and I generally try not to appear to criticize another agent. It is – to me – an interesting topic. So interesting, in fact, that had I written this post when I first noticed the yoyo pattern, I had not yet realized that this technique may be valid for the StreetEasy crowd; I thought (and continue to think) it is a waste of time for the lazy-agent crowd.

© Sandy Mattingly 2007