“Anchors Away: Home Sellers Shouldn’t Look Back”

Marilyn Kennedy Melia

The previous two years were exceptionally good to home sellers. ATTOM Data Solutions, a real estate analytics firm, reports that in 2022, home sellers nationwide realized a profit of $112,000 on the typical sale, up 21 percent from $92,500 in 2021.

But the good fortune enjoyed by past sellers could lead today’s sellers into a costly trap of “anchoring bias”. This mind-trick is a quirk of human nature, whereby we fixate on a past information, like a sales price, and doggedly maintain it as a reference for value today.

Since rising interest rates in past months have pushed home prices some- what lower, the price a similar home in the neighborhood sold for may not be a reliable predictor of current value.

“What you feel your home is worth is not relevant to what it will sell for. The market dictates what it is worth. You can hold out for more, but it can cost you time and money,” explains Scott Bishop, executive director of Avidian Wealth in Houston.

Bishop outlines a typical scenario of a client who is reluctant to lower his sales price eight percent. If you sell quicker, you will decrease your cost of maintenance, utilities and property taxes,” Bishop advised. And, putting a portion of sale proceeds – after reserving funds for a less expensive retirement home –into investments, can soon replace the money his client believes was “lost” on his sale.

Michael Meier, a New York City broker with Compass, agrees that objective look at options – holding tight, reducing the price or renting the home in lieu of selling now –usually frees sellers from anchoring bias.

Some owners, for example, believe that in a couple of years they will get their desired price. Meier asks them to consult with their financial advisor and calculate their annual ownership costs against their expected future price gain.

The non-financial opportunity costs are also part of the mix, says Meier.

“Does waiting mean you can’t move? How will that impact your life?