Selling your home? Ownership bias may cost you
Selling a home is often a deeply emotional and significant financial decision. The personal attachment we have to our homes can sometimes cloud judgment, leading to what is known as ownership bias.It is important to overcome this bias to ensure a timely sale at full value.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa explains that ownership bias is a common psychological effect where individuals tend to assign more value to things merely because they own them.
“This bias can lead homeowners to overestimate their home's worth, making them reluctant to price it competitively or accept reasonable offers. This can make it challenging for them to find a willing buyer and conclude a successful sale,” Goslett explains.
We are all equally susceptible to this physiological phenomenon so it is important not to assume that you are immune to it. “Consider, for example, that you have just renovated your kitchen. While you may love your newly installed marble countertops, it is possible that buyers in your area are not as enthusiastic about this upgrade as you are. This might lead you to falsely believe that your home is worth more than what buyers are prepared to pay for your home,” he cautions.
Asking price
Because of this ownership bias, homeowners often want to set their initial asking price too high, believing their property is worth more than comparable homes in the neighbourhood. After all, you prefer your home above all the others listed in their neighbourhood, so why wouldn’t buyers prefer it too?
“The reality is that an overpriced home often results in a stagnant listing, forcing the seller to eventually lower the price, sometimes multiple times, which can make the property seem less desirable,” Goslett warns.
By leaning on the advice of an objective third party, like a real estate professional, homeowners can guard against their ownership bias.
“It's essential to trust your agent's expertise and be open to their recommendations, including staging tips, marketing strategies, and realistic pricing. Remember that it’s their job to know what buyers are looking for in your area and what they are prepared to pay too. It will only be to your benefit to lean on their market insights and expertise,” he suggests.
Ownership bias is a natural but potentially costly pitfall when selling a home. By being aware of this bias, trusting professional advice, and adopting a buyer's perspective, you can navigate the emotional landscape of selling your home more effectively and, more importantly, you will also have a better chance of selling your home for its full market value.