One of the most difficult things that many of us have to come to terms with is that our stuff is worth more to us than it is to someone else.
Anyone who has tried to sell a formerly-treasured possession, sure that it is worth $50, knows the disappointment of realizing that someone else only thinks it's “worth” about $25 or $30 — or possibly even less.
The same thing can be true of your home.
Chances are that you think your home is worth more than it actually is.
When you go to sell your house, it's hard to think that the home that you have put so much into just isn't worth as much as you thought.
It's a hard lesson in realizing that worth is mostly subjective.
Why Your Home is Worth More To You
There are a number of reasons that your home is worth more to you. When considering what something is “worth” — particularly a home — it's easy to get caught up in sentimentality, as well as what you feel like you deserve, considering what you have put into your home. Here are some of the things that can make your home seem worth more to you:
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- How much you paid: First of all, your point of reference starts from how much you paid for your home. Most of us feel that home prices should go up over time. Even during a down market, it's common to feel that a home is worth at least what you paid for it. The idea of accepting $20,000 less than you paid for your home is practically anathema, and that means that you start out biased by your anchor.
- What you've put into it: Next, your idea of how much your home is worth is also influenced by how much money you've put into your home. If you've made home improvements, you naturally believe that you have increased the value of your home. Taking out a loan to make home improvements can lead you to believe that your home should be worth more. When you pay $2,000 to build a fence, you tend to think that your home's value has increased by $2,000. Unfortunately, the truth is that home improvements, from kitchen remodels to new flooring, don't increase the resale value of a home by the amount that you put into it.
- Sentimental value: Is everything in your home set up just the way you like it? If so, you attach value to the comfort you feel, and the arrangements that you have made in the home. Additionally, you likely have fond memories of events connected to living in the home, or you might like the neighborhood and think it's a great place to live. In these cases, your sentimental view of the home boosts its value in your eyes. You think that it's a great opportunity — and therefore the buyer should compensate you accordingly.
Unfortunately, this type of outlook can cause problems when you are trying to set the price on a home that you are selling. You can use the market as a guide, but it's so easy to dsimiss low-selling houses in your neighborhood as aberrations, or make excuses as to why your home shouldn't be subject to the same fate.
Why Others See It Differently
The buyer likely sees things differently. He or she is trying to get a good deal, and he or she isn't thinking of the same things you are — at least not in the same way. Your buyer is going to end up with his or her own anchor, depending on how much is paid for the home. As a result, it is in the best interest of the buyer to get the price down as much as possible.
Another consideration is that the buyer didn't put all that money into the home. All he or she sees is the finished product. The fact that you have made improvements and upgrades just doesn't matter that much. Finally, the buyer hasn't had any of the memories that influence your perception of value.
Unless you can appeal to the emotional side of the buyer, and make him or her see the value that you do, in terms of location, convenience, and comfort, you are unlikely to see any solid progress.
In the end, it's important to realize that your home is probably worth more to you than it is to someone else. Take that into consideration as you try to sell, and be ready to negotiate a little bit.