Seventy-seven percent of home sellers think their homes areworth more than the agent’s recommended selling price.
Arecent study published in the Journal of Housing Economics and quotedin RISMedia found that homeowners are overestimating the value of theirproperties by 8% on average.
Thestudy harkens back to an earlier survey of real estate agents, the vastmajority of whom felt their clients were overestimating the worth of their homes– some by as much as 20%.
These incorrect assumptions on the part ofhomeowners often have unfortunate results in terms of initially overpricingtheir properties, then dropping prices by toomuch when offers don’t happen.
Ofcourse, it’s human nature to think optimistically about your home’s value.Emotional attachments color people’s perceptions about their home’s worth. It’sactually rooted in psychology and our natural human tendency toward lossaversion.
And,as RISMedia reports, homeowners believe prices will continue to rise; a 2014report by the Federal Reserve found that
39% expected home prices to rise,
compared to 6% who expected a decline.
Homeowners also are naïve about the impact ofupgrades on the value of their properties. In many cases, you may get back onlya percentage of what you put into home enhancements, and many improvementsdon’tcome close to paying off what they cost, especially if they’re not in line withthe neighborhood norm.
Sellerssometimes list their houses for a high price in hopes that someone will bewilling to pay the asking price and turn the inflated value into realizedvalue. But too often, owners don’t understand their local housing market. Thisunderscores the need to use reliable data, including recent sales comparables,to know exactly what a house is worth. Real estate agents are in touch withlocal markets and offer reliable – and realistic –pricing advice.
Don’ttry to go it alone.