The Endowment Effect

There is a natural bias that takes place for all of us called the Endowment Effect. 

“The endowment effect describes the phenomenon where you overvalue things you own, simply because those things are yours”

The primary reason for a listing to sit and not sell is the pricing.We have a surplus of inventory right now (5.3 months) and Days on market are soaring. Interest rates are still keeping buyers on the fence and the ones that are on the field are VERY picky.

Most sellers (including myself) can easily fall into the temptation to overprice their property simply because it’s worth more in our eyes because of the value we associate with it.

How can you put a price on the place you brought your newborn home from the hospital to?

How can you put a value on the home you got married in?

What’s the value of the home you spent the last few months taking care of a loved one in?

IT’S PRICELESS…

But NOT to the buyers in the market. Those memories and associations are not theirs, therefore the value doesn’t translate.

We as sellers have to recognize that and price objectively according to what the current market is dictating.

The value we associate with those memories will move with us from house to house because they are with us, not the property.