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Have you heard of the endowment effect?
If you’ve studied psychology or behavioral economics, you may have heard of this. The endowment effect is the idea that something has greater perceived value to you when you own it. And this effect definitely comes into play in the realm of real estate.
In one study, people would be asked how much they would pay for a mug. These study participants would usually reply with answers like “$2.”
However, when a similar group of participants were given a mug and asked how much they would sell it for, their answers changed. When it came to them selling the mug as opposed to buying it, they priced it around $8.
“The endowment effect definitely comes into play in the realm of real estate.”
There have been a number of other studies to show this point.
The same can be applied to real estate. Studies show that the average homeowner believes their property is worth approximately 8% more than its true value. This is the endowment effect at work.
So, if you have any real estate needs, I would love to help you out.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.