I have a website which sells homes, we have specials where we have a
price of a featured home that falls in price a cent a second ($864 per
day) until some one decides to attempt to buy the home, is it best to
do it this way or go to the bottom line and go up?
Which is the most effective and likely to succeed.

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Request for Question Clarification by keystroke-ga on 31 Jul 2006 09:59 PDT

I think you are fighting a double edged sword here.

Both of the stratagies would work, but they have both positive and
negative options.

It is great having a website
www.homesthatarereallycheapprettygoodandilikethemanywaysoidontmindifyoudontpluswehavegreatspecialoffers.com

but if no one knows about the special pricing or that your website
even exists NO ONE is going to use it, see it or take advantage of
your special offer.

The main things I would think about are: Are you getting the prices
that you require to A stay in business, B keep your clients happy
(both selling and purchasing homes).

If you advertise the price of a house starting at your target price +
8640 (never start the house for sale at the target price!) this gives
you 10 days of the price dropping before you start to run the risk of
the house not reaching the value it should be selling at.

The longer people wait (do you have a fixed time that the houses are
on sale for before they are removed?) the cheaper it is so people will
be sitting round hoping no one else gets it before they do, eventually
someone will be the chicken and purchase the house before anyone else
can. As the price is dropping the house becomes available to more and
more people so more and more people will be watching it (perhaps have
a counter displaying the number of people watching the house or have
viewed it in the last hour will help people "make up their minds").

In the alternative option having the price rise will rely on people
seeing it at the start of the listing (GOOD ADVERTISING IS PARAMOUNT
FOR THIS SO PEOPLE GET IN EARLY AND DON'T MISS THE CHEAP PRICE!!), if
people miss the initial start time and the price goes above their
maximum they will never be in contention for the house. As the price
goes up the amount of available clients for each house diminishes.

As you can see from this scenario, price starting high and falling
allows the sale to last longer and word of mouth can bolster your
potential customers.

Starting the price low will NEED a lot of people seriously looking at
purchasing a house ready and waiting for it to go on the market for
them to be in with a chance. To get the message across you are going
to need a good advertisement to get everyone ready, word of mouth
won't give everyone enough time to be online.

My advise is stick with the REDUCING PRICE HOUSE sales. In the long
run I feel it is more adventageous to you and your clients. If you
want to boost site hits or possible sales every month throw a house
out there after a big advertising campaign where a house starts low
and goes high, the first person to buy gets a good deal.

I hope this helps, if it is what you were looking for I will post as the answer.

--Keystroke-ga

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Request for Question Clarification by keystroke-ga on 31 Jul 2006 10:06 PDT

It may also be worth while to draw a graph to outline the advice I gave you.


Graph showing Prices starting high and falling

      +              /
Number             /
Clients          /
               /
             /
           /
      -  /
       +    Price     -

From this you can see that as the price falls the number of clients
available to purchase the house increases. (Everyone can afford a
house that costs nothing, but no one can afford a house that costs 60
trillion dollars).


Graph showing prices starting low and rising

      + \             
Number    \          
Clients     \      
              \  
                \
                  \
      -             \
       -    Price     +

This graph shows you that as the price increases the number of clients
who can afford or who want to purchase a house at an ever increasing
price diminishes.

As these sales are dependant upon time it may be in your interest to
catch the casual browser with the falling house price than it would be
to try and saturate a local market with an increasing price selling
model.

--Keystroke-ga

I doubt that there is a single strategy that is most effective for all
types of home sales. Are these desirable residences in great
condition, or run-down houses in desperate need of rehab?

I rather like the idea, and Keystroke's points.

One advantage of a "Dutch Auction" (what you are doing and the way
flowers are sold wholesale in Holland) is that you avoid contention
when someone agrees to buy.  With a rising price, when someone says
"I'll take it!", then guy who was too late  - and the seller -  may
complain that that you didn't get the best deal for the seller.  Since
you are not having an open auction with a hammer fall to close bids,
you would need a watertight agreement with sellers to avoid their
renegging when they hear that someone wanted to buy at a higher price.