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Emotions Vs. Logic Selling Real Estate

(The real estate market has become extremely competitive over the past 10 months, for sellers.)

That's something that hasn't been an issue since last century.

The booming years from 2000 to 2005 in the United States allowed many homeowners believe that they could sell their $200,000 condominium for $1 million within 10 years and that comes with little exaggeration.

It is now apparent that is not going to happen as the market correction has actually depreciated existing home values. Now, selling a property has become a game of wits and knowledge.

Unfortunately, many sellers are finding it difficult to let go of the emotional connection they had with their property and magnificent profits.

The article, "For Sale, By the Owner's Ego," published in the November 4, 2006 edition of The Washington Post and written by Kirstin Downey explains that although just about every seller actively pursuing the market stands to make a profit from the price they originally paid, they are unable to accept the current situation and be happy with any sale that can be generated.

The majority of people involved in the real estate industry in any way believe they make researched, sound financial decisions of what and where to buy or sell. But it is becoming increasingly clear that emotions due in fact play a significant role in a home buyer's or seller's decision making.

"For Karyn [LeBlanc], for example, the condo she bought in the District's Palisades neighborhood in 2002 was the first big, independent purchase she had ever made. She proudly added many special touches, including a closet organizing system she thought would be the envy of any woman. But she and Sam got married, had a baby and decided to sell the condo."

Over the course of a couple months, Sam determined the asking price on the condo should be $269,000. Karyn was devastated by this because she knew of similar units that were not as nice that sold for $280,000 the prior year.

"You want to believe it's worth a lot more because you've invested your time and energy on it," Karyn said.

While it has been known that buyer's make property purchases based on emotions (dream home, close to family, etc.), a seller sets prices due to personal ego and self-image just as much as what the market would indicate.

"That's one reason for the phenomenon known as 'sticky prices' -- home sellers who won't cut their demands enough to make a deal. It helps explain why the unsold inventory of homes has risen so high, and why, despite this rise, home prices in the Washington area have fallen only slightly. There were 24,741 homes for sale in September in Washington and the close-in suburbs, up from 13,950 a year earlier."

Economic researchers have found that emotions play a bigger part in selling real estate than they previously thought. In fact, for a while, economists believed that people made real estate decisions like logical robots with little to no emotions.

"But a body of research developed over the past two decades, known as neuroeconomics or behavioral economics, has shed light on how powerful a role the unconscious mind plays."

Two key concepts have developed as a result of the neuroeconomical research: many people will pass up sure profits for illusory ones and some others will turn down profits if they believe someone else is unjustly making a higher profit.

Bottom line is if you are a seller and really want to sell your property then you have to leave out your emotions. If you do not want to sell at the lower values we are experiencing throughout the country, then don't sell and wait for the values to appreciate again; although that may take a year or two.

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