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Home Value Delusions
The Price is Right
As the market improves homeowners gain confidence about the value of their homes, sometimes they even feel inspired to attempt to sell their homes themselves (FSBO). The problem is that sellers are biased in the pricing of their own homes.
The average homeowner overprices their home by 8%. Those who purchased their homes during the housing boom between 2004 and 2006 overprice their homes by 12%. Unrealistic optimism and overestimating home values leaves homeowners vulnerable to adverse shocks and disappointment. 17% of sellers last year had to stall the sale of their home because the value of their home was worth less than their mortgage.
Although home values are rising, so are homeowner's expectations. This also complicates refinancing, only 50.9% of refinancing applications were approved last year assumebly because owners make refinancing decisions alone.
The National Association of Realtors reported that in 2014 on average VSBOs received a 13% lower sales price and took 19 more days to sell than homes sold by real estate professionals. Counselling sellers to price their home accurately is one of the most valuable skills professional real estate agent provide.