You rarely find anyone admitting they have a preference in one way or another. Yet, most of us are biased, especially regarding matters that are most important for us. Here I'll look into the biases that influence home pricing and how to avoid it.
How do preferences skew your home pricing? Keep in mind that everyone with an opinion about the value of your home has a preference. To avoid costly mistakes, we need to recognize the biases in ourselves and the people around you. Let's look at the sellers' biases; every homeowner has many reasons why their home is worth more money than what the market offers.
It is the market, demand and supply, that determines your home value. If there are a few houses for sale in the same area, your house is compared to them; so you need to adjust your price accordingly. It is understandable; you have paid 80K to have an aluminum roof, and you like to add it to the house's actual value. However, the added value may not be the same, in the buyers' opinion.
To avoid such a mistake, you need to invert your thinking and position yourself as a buyer. Ask what buyers think of my house is worth and willing to take a 30 years mortgage to pay for it.
Charlie Munger, The Vice-Chairman of Berkshire Hathaway, suggests avoiding biases in transactions by inverting your thinking. You may ask the questions why buyers should buy your house and why they should NOT. This approach will help you to be more realistic and avoid the costly mistake of overpricing your home. Charlie Munger is famous for his quote, "All I want to know is where I'm going to die, so I'll never go there."
You may think real estate agents are immune to the idea of "desire, and I want." On the contrary, when I was selling my house, I had to rethink and go back a few times to correct the pricing. I realized what I want or desire has no relevance to market value. Buyers will compare my house to houses in the area and buy a house that is priced at market value. By overpricing, you may be promoting and helping to sell the homes in the area.
Real Estate agents may be telling you what you like to hear. The real estate agents want to get the listing; some may focus their presentation on your home and its value. A topic that you may appreciate. They may exaggerate the price to gain favour compared to other agents you'll be interviewing in the process. There is a simple way to avoid real estate agents skewing the numbers to get the listing. During the interviewing, steer away from conversations about your home value. Instead, focus on the agent's experience in the area, marketing strategy, references. See the article on interviewing real estate agents. Only after you hire the trusted real estate agent should you talk about your home value.
About the author: The above Real Estate article was provided by David Khosravi, a leader in his field in Willowdale, North York, Toronto. Reach out to David via email: firstname.lastname@example.org or by phone: 416.990.2424