What is My House Worth?

It’s summer. Many people who put their house on the market earlier this year have not had much traffic. And they are getting nervous.

According to a post on www.zillow.com, May is the best month to sell a house. And Saturday is the best day.

If you don’t know, Zillow is the leading
online real estate and rental database company in the country. They are a treasure trove of information about all things real estate – to include selling your house. However, market circumstances influence the best time to list your home, including job growth, mortgage rates, and tax incentives.

Nationwide, the best time to sell a home in 2019 to maximize return and minimize time on the market is May 1 to May 15. Homes sold in the first half of May sell six days faster and for $1,600 more than the average listing. And homes listed on a Saturday receive an average of 20 percent more views in the first week on the market compared to homes listed on Tuesdays. (www.zillow.com/sellers-guide/best-time-to-sell/)

But it’s now late July! Everyone is on vacation. School starts soon. And contrary to the encouraging words from your realtor, you are worried.

The problem may have nothing to do with your realtor, your house, or the market. The problem maybe you. Well, not you per se. But your nonconscious feeling-brain.

Here’s where the fun begins. You, like most people, believe your home is “special” – above average and worth a premium.

Behavioral economists call this the “endowment effect.”

The endowment effect is the tendency to value things you own more highly than equivalent things you don’t own. In other words, the price you would want for selling an item is likely to be higher than the price you would be willing to pay to buy the item. www.scienceterms.net/psychology/endowment-effect/

In plain language, “your stuff is worth more because it’s your stuff.” Why? Because your non-conscious feeling-brain values a thing more after you own it. And you will generally demand much more when you sell it than you paid for it.

You have an emotional attachment to your house. You picked out the colors. You planted the tree out front. It’s the center of your life and family. I get it. But no one cares as much as you do. And that’s the dilemma.

Your house is worth more because it’s your house. So, if some stranger wants to live in your house, they’d better be prepared to pay for the privilege. Maybe a lot more.

It seems the value we place for an object, like a house, changes after we buy it. The very fact that we own something makes it more valuable. This is why a house is not just any old house. It’s your house. And you’re going to demand a premium to let someone buy your home.

Think about the impact of this.

BUYER …

SELLER …

  • You are not emotionally attached to the new house.
  • You are emotionally attached to your house.
  • You do your best thinking-brain research to determine the “fair” market value of the listing.
  • Every decision you take is biased by the endowment effect.
  • You make an offer that you believe is in line with market conditions.
  • You receive an offer that is in line with market conditions.
  • Your offer is not accepted.
  • You are “insulted” and reject the offer.

This behavior was one of the reasons it sometimes takes so long to sell a home, or for the housing industry to recover from the crash of 2008. Everyone thought their house was worth more than their neighbor’s. No one wanted to sell for less than they thought it was worth, even if it made economic sense to sell.

The endowment effect can be an issue in all transactions – big and small. As a consumer, consider this:

  • Know that you have money biases that impact your spending decisions. We all do.
  • The endowment effect is an unconscious behavioral bias that can be especially troublesome for significant purchases and sales.
  • Merely being aware of the endowment effect can help you avoid it.
  • Force yourself to use your thinking, analytical brain in all significant spending, and selling decisions.
  • Use a third party (agent, broker, lawyer, etc.) to keep your thinking brain engaged.
  • Do your homework and trust the numbers; again hard thinking-brain stuff.
  • Don’t forget the opportunity cost – the value of the next-highest-valued alternative use of your time and money. Sometimes cutting your losses makes sense.
  • Take advice from a trusted and experienced realtor – someone without your emotional ties.

Ted McLyman

www.TedMcLyman.com


Take My FREE Course “Why Money Makes YOU Crazy” at:


https://moneymakesmecrazy.com/mmmc-you-crazy-crs-pg/

 

Ted McLyman
 

Entrepreneur, business owner, author, speaker, trainer, Lt Col, USMC (Ret), and Ironman All World Age Group Triathlete.

Your SEO optimized title page contents
>

FREE Course From My Books: "Why Money Makes YOU Crazy"