It's not a great time to be selling a house — and to add insult to injury, behavioral economists put the "blame" on sellers. In many cities, it seems that no buyer wants to pay what any seller can bear to accept. This is said to be a classic case of loss aversion. Sellers remember what their house would have sold for, before the bubble burst. Compared to that would-have, should-have price, today's prices feel like losses. When confronted with a probable "loss," people are inclined to take chances, in order to avoid it. This is why racetrack bettors try to erase their losses with a long-shot bet. And it's why today's home sellers set prices too high for the market, in the faint hope that somehow, someday, a buyer will pay their unrealistic price. This leads to frustration on both sides — or make that, on all three sides. Agents are getting slammed, too, as sales slow to a trickle.
Latest postcard from the disaster: A Los Angeles home was recently marked down $4.5 million. It's the Ennis House, a famous Frank Lloyd Wright creation completed in 1924. You may have seen it in Blade Runner or, um, a Ricky Martin video. Listed last year for $15 million, it didn't sell, and it's now been discounted to $10.5 million. Even that price may not qualify as a bargain. It's one of Wright's "textile block" houses, notorious money pits. Severely damaged by the 1994 Northridge earthquake and some monsoon-like rainy seasons, the home was red-tagged by city inspectors in 2005. The foundation that owns it spent $6.5 million on repairs, and it's estimated that the new owner will need to lay out a comparable sum. For what it's worth, Zillow's "Zestimate" for the place is only $2,090,500. That presumably reflects what it would be worth without a starchitect name attached.
There may be a smart psychological tactic for anxious home sellers: List a house with two prices. In Australia, it's been the custom for sellers to do that, giving a minimum and a maximum asking price. The practice has turned up in suburban Long Island, reported Marcelle S. Fischler in The New York Times.
…Ms. Karekinian has joined a small group of pricing pioneers on Long Island: Rather than settling on one number for her five-bedroom colonial, she opted for a “value range price” of $999,000 to $1,194,876. She decided to adopt the tactic in listing the property last fall with Carol Poetsch of Prudential Douglas Elliman’s East Meadow office.
One advantage is obvious: Buyers scanning listings online usually set a minimum and maximum price. These are round numbers (often chosen from a menu on the listing site). In the example above, a buyer whose maximum price was $1 million would see a house listed at "$999,000 to $1,194,876," but not a house listed at a single price higher than a million. (Of course, this depends on listing sites being able to handle price ranges.)