Many homeowners have an inflated sense of their property’s value when it comes time to sell. While understandable, sentimental attachment and wishful thinking can lead sellers to overprice their homes compared to current market conditions. Here’s why this unpopular opinion has merit:
The Endowment Effect Causes Emotional Valuations
The endowment effect in behavioural economics shows that people value items higher simply because they own them. Sellers apply this bias to their properties, even though market value is detached from personal value.
Homes also hold special meaning due to memories and time invested. So it’s natural for sellers to think their home is worth more than data suggests. But the market pays for comparables, not sentiments.
Renovation Costs Don’t Guarantee Higher Value
Just because sellers poured money into renovations doesn’t mean they can recoup it all. Return on investment depends on the work done, marketplace trends, and more.
Some sellers wrongly assume their home increased in value dollar-for-dollar with reno costs. But in reality, minor cosmetic fixes add little value compared to major upgrades.
Comparable Sales Reveal True Market Value
Sellers often selectively choose flattering “comps” that support higher list prices. But an objective analysis of recent sales of similar nearby homes gives the real picture.
Professional valuers dig deeper into adjustments between comps and the subject home. Sellers doing their own analysis tend to exaggerate similarities and downplay differences.
Listening to Input From Valuers and Agents
Valuers provide unbiased assessments of a property’s value. And agents know the market’s pain points and price sensitivity. Ignoring their valuation and pricing advice is risky.
Of course sellers want top dollar. But being rigidly attached to an aspirational number that the market won’t bear leads to disappointment.
The Costs of Overpricing Are High
Overpriced homes linger on the market, get few showings, and attract low offers. This leads sellers to cut prices repeatedly, losing potential buyers who think something is wrong.
Patience has limits. Most sellers need to sell within a certain timeframe. Refusing to price competitively costs time and money.
Balancing Emotions With Market Realities
Sentiment aside, a property is ultimately worth what the market will pay. Savvy sellers check their emotions and calibrate list prices to current conditions and comps.
This unpopular opinion rings true for many sellers. But facing realities instead of wishful thinking leads to better outcomes. That makes it worth heeding.