Every homeowner wants to know how much their home is worth, particularly if they are thinking of selling. The honest answer to this question often leaves most of them disappointed.
To avoid disappointing the homeowners and risk losing listing their home for sale, many real estate agents will often choose not to disclose the true likely selling price to the sellers.
The price the agent quotes a home seller is not a price they have to guarantee, so they will often quote more than it’s worth, overstating the price, but still making it believable enough to win them the listing.
As humans we all tend to put an unrealistically high value on things to which we are personally attached to, such as our home. In economics this is referred to as the “Endowment Effect”. It’s normal to expect a higher price on our homes because we have an emotional attachment to them.
Since there is no simple formula for calculating the value of homes, dishonest agents can easily lie and get away with quoting homeowners an inflated price. They know the endowment effect will allow them to get away with an overestimated price, as we are all susceptible to believing what we want to hear.
Even when they tell you your home is unique or hard to price and they don’t give you a price, agents still know the market value of your home within a 10% range, but they don’t want to tell you.
If you were to employ an independent valuer to value your home, the price they quote you is supported by evidence. A real estate agent that talks about what a buyer could pay for your property or what may happen on auction day is simply speculating on events. They are not pricing your home based on fundamentals. If they do, they will use superior comparable homes to yours to support the inflated price they have given you.
What your property is worth in the marketplace is determined largely by what other comparable properties in the area have recently sold for.
In this digital age of online data with a wealth of information easily available, you can value your home by comparing it with what other similar properties in the area have recently sold for. However, because of the endowment effect, being objective and unbiased about the value of your home is challenging. Knowing the benefits of the home as you do, it is easy to think of those as equating to ‘higher perceived value’. You must be rational and not let your emotional attachment to your home influence your decision when arriving at a price.
Ultimately it is the potential buyer’s assessment of how your home compares with other recently sold properties that will determine what they are prepared to pay for it.
Because buyers want to try and buy for less, the only other factor that can have an impact on the price you receive for your home is your agent’s ability to get the highest price from each interested buyer. Knowing how to negotiate the highest price the buyer is willing to pay for your home is the most important skill to look for when selecting an agent. The agent’s ability to negotiate will guarantee you get the highest price in the market.
A good agent will be able to get that little extra from the buyers. The agent who deceives you with the price at the start however is often the worst agent you can choose. If they deceived you once they will surely deceive you again when selling, and you will not get the highest price for your home.