When we live in a place for long enough, and especially when it's a home that you own- you can become very attached to it. Our homes can also contain our tastes, personality, cherished memories or favored heirlooms. They become an extension of ourselves and part of our identity. It’s no surprise that when it comes time to sell a house, this attachment can do more bad than good.
Additionally, when we own something, we adopt that as our reference point for the status quo. This is called The Endowment Effect. We tend to focus harder on what we’re giving up than what we might get in return, so a big change like selling your house feels more like a loss. This is just one of many reasons that people have a tendency to over value their homes, but there are plenty of more common sense reasons as well.
For example, Zillow and Redfin can provide over-inflated estimates, especially in a market like Boston, where the housing is often older and more disparate than in other parts of the country. Online estimates also can’t account for things like loud overhead air traffic, a busy intersection, or peeling paint. Even Zillow always recommends that people work with a local real estate agent when it comes time to buy or sell their home.
Another reason sellers and buyers may not see eye to eye is that homeowners adapt to their environment, sometimes developing a blind spot to their home’s flaws. As anyone who’s found a way to make life work despite minor annoyances can tell you, it’s pretty easy to get used to tight quarters or ugly countertops — and thus underestimate their negative effect on buyers.
Most people don’t understand that overpricing a home is a problem. They assume it’s better to ask for more first and you can always go lower right? But over-valuing a home at the onset can really hinder the sale process. Issues arise when the overpriced listing sits on the market for too long. This will make it seem unattractive and people will assume there is something wrong with it.
Overpricing is less detrimental in a hot market like this one, but the real problem is in a depreciating market, because sellers are fixated on the value of a neighbor’s home that sold last year, an appraisal value from when they last refinanced, or the advice of a family member or co-worker who’s out of touch with the current market.
The bottom line is that buyers ultimately determine a home’s value, not the seller. People can fail to understand that the value of things doesn’t depend on how much money you put into it, but how much money someone is willing to pay for it.