As a professional Realtor®, I have found that homeowners always have a value in mind of what they think their home is worth. This is true whether they are considering going on the market for sale or not.
The value typically reflects peak market prices. The challenge is when the market shifts. For example, if the current market indicates that the value of a home to be around $850,000 but at the peak the home would have sold for $1 million, the Seller frequently clings to the hope of obtaining the higher price, even though current comparables indicate otherwise.
The differential is what I call “mental money”. It isn’t actually money in the bank until a Buyer is willing to pay that value. Letting go of that “lost” mental money on a home can be difficult. On the flip side, no one ever seems to complain if the market value is greater.
Letting go of anything lost can be painful, whether the loss is perceived or real. It seems though in financial terms there is considerable trauma when associated with loss in home value. This is related to the old adage: a man’s home is his castle. The owners love their home with all its unique characteristics and its quirky issues and cannot seem to understand why other people don’t feel the same way.
Another reason is that home owners tend focus on the best case scenario. It is the phenomenon that home owners tend to focus on the “gain” but don’t ever want to see the “loss”. Perhaps it is in wanting to be optimistic, but I think it may be even more deeply rooted than that. I liken it to people’s children. Have you ever met an ugly baby; that is, from the parent’s perspective? Other people may not see the beauty in that baby, but the parent sure does!
That is what I have often found with home owners. Having purchased it, lived in it, and made it their own, they love their home in a way that is no longer objective. The market doesn’t look at the purchase of a home in the same light. The market looks at a home as a commodity.
It is the value which causes a Purchaser to pay for something – not what it costs the owner – not what the value “might have been” sometime in the past or someday in the future. Just as in the stock market, if the owner of a stock doesn’t sell in that moment in time, then the differential becomes unrealized loss or gain, whichever the case may be. This unrealized loss or gain – the “mental money” – is what people have a hard time lettin go of.
When looking back at the last peak of the local real estate market, I can show numerous situations where Sellers were presented excellent contracts on properties that they would not take because they thought there was more money to be had. The Sellers thought that they were leaving money on the table, that the market could or would be even better “someday”.
That is all “mental money”. The reality is that the true value of a home is what a buyer is willing to pay and a Seller is willing to accept. The key to this, though, is that the Seller needs to be willing to accept a market price, not a value based on unrealized gains.
How do you know the value of a home in current market conditions? The best guidance is obtained from a professional Realtor that is actively involved in your marketplace. Karen Briscoe and Lizzy Conroy are available to assist with your housing. The Huckaby Briscoe Conroy Realty Group is intimately familiar with the Northern Virginia, Washington DC and metro Maryland real estate market. Whether looking to sell or buy in the area, Karen Briscoe and Lizzy Conroy would be delighted to be of assistance. Please contact via the means most convenient for you: www.HBCRealtyGroup.com, 703-734-0192, Homes@HBCRealtyGroup.com.