If you are a seller, make sure you do not fall under the influence of the “endowment effect.” Today I would like to explain what I mean by that.
Do you know what the “endowment effect” is? If you are a seller, you need to.
The endowment effect, first coined by economist Richard Thaler, refers to the idea that people tend to place more value on things they own. This even pertains to identical objects. For example, someone might buy a coffee mug that, at the time, they only believed to be worth $2, and then try to sell it later on for more.
This effect is about more than the desire to make a profit. It actually has more to do with the way people conceptualize worth as it relates to personal ownership. Since homes are our largest personal asset, this effect is very prevalent in real estate transactions.
I, myself, am guilty of falling under this effect. When I listed my previous home on the market, I overpriced it. I saw all the good in the property because it was my own. We actually had to reduce the price several times before the listing actually sold.
“Since homes are our largest personal asset, this effect is very prevalent in real estate transactions.”
That said, this is a very common occurrence in our market. If you work with the right agent, though, they will be able to help you be as objective as possible about the home sale.
If you have any other questions, would like more information, or are thinking of buying or selling a home, please feel free to give me a call or send me an email. I look forward to hearing from you soon.