Listing price lower than expected sales price

I am doing some research in a possible paper. I recently read of a case in Behavioral Finance that showed that when facing a possible capital loss, some sellers will list properties at higher than typical asking prices. For example, setting a listing price at 25% above expected price compared to a more standard of say 10%. The results showed that, on average, resultant sales prices were higher... [more]

I am doing some research in a possible paper. I recently read of a case in Behavioral Finance that showed that when facing a possible capital loss, some sellers will list properties at higher than typical asking prices. For example, setting a listing price at 25% above expected price compared to a more standard of say 10%. The results showed that, on average, resultant sales prices were higher than seller's original expectations which suggests that this strategy was in fact the best choice. What does anyone think of this strategy? But in markets other than NYC, especially overseas, I see many listing prices which are below expected sales prices. Ignoring the possibility that seller//agent simply mispriced the property, I believe that this strategy is designed to encourage a bidding war that sellers//agents expect will result in a higher sales price than if traditionally listing at a price above expected. I saw this phenomena also in the Silicon Valley market during the dot.com era. I think this strategy may make some sense at least in a quickly appreciating market as it draws buyers in with "reasonable" listing prices and then lets market forces work to drive the price up. Buyers may be more willing to increase their bids when they see other bidders. What do people here think may be the best strategy for setting listing prices? Does it depend on the type of market or specific motivations of the sellers? [less]