The Psychology of Buying and Selling a House


There’s an overused expression we’ve all probably heard way too much; “It’s not a house, it’s a home”. Trite as it may be, it holds a lot of weight. This week marks the 10 year anniversary of my wife and I buying our house, and in that relatively short time span, we have packed a lot of memories into that 1953-vintage, Levitt-designed collection of timber and shingles (and asbestos and lead, probably) that we call home.

That house holds the porch where Santa left a bow-wrapped basset hound puppy for my wife in 2009, the front door we crossed with our newborn daughter for her first day home and the big picture window in the living room where we held our month-old little girl tight as we watched Sandy take out transformers and trees around the neighborhood, thankfully leaving our maple trees upright and off our roof.  And were we ever to sell the house, the idea of never seeing these places again, truthfully, is hard to swallow.

In a recent Wall Street Journal article (read here), Matthew Kassel argues that the emotional weight we invest into our homes makes us do some incredibly dumb things when we’re trying to sell it. He says “We let our emotions blind us to cold facts about the market or the realities of ownership…we prioritize one set of emotional needs over others.” As a result, he says, we may want to spend more time with family but, in our goal for a house that’s a certain size and certain style, give ourselves lengthy commutes that take hours of family time away.

These same emotional hang-ups can lead to some bad decisions when it comes time to sell. The article mentions a survey conducted by Yale economics professors that found home buyers have “extremely high long-term price expectations”. This inflated view of worth can cause bad decisions in terms of location or social scene just because the house seemed like a good investment. It can also cause sales to fall through from homeowners unwilling to settle for less than their ideal price.

The most powerful emotional drive when it comes to homes – as many of us have found since 2008 – is loss aversion. We simply don’t want to (some of us can’t afford to) sell our home for less than we paid. The article quotes Columbia professor Christopher Mayer telling us to get over that hump. He says, “It’s a fallacy to assume that you’ll be able to recoup losses you’ve already incurred.” The market is the market.

This blow is softened a bit, however, by another note in Mayer’s studies. He conducted a look back at the Boston condo market in the ‘90s and his analysis showed that owners who put their properties up at above-market rates – while still below what they’d paid – sold their homes for more than they expected. The tradeoff was that they had their properties on the market a good bit longer than lower-priced properties.

Here in the office, we see clients enter stalemates with themselves over their homes. They can’t get their retirement plans fully underway because they would have to sell their house at a price they don’t like. Others would like to, or sometimes need to, move to a smaller home but have too much stuff. Instead of sorting through the 40 or 50 years of memories stored in their house, they choose not to deal with it at all and stay in a house far too large for them in a neighborhood that’s changing around them. Our good friend and senior move specialist Marlene Stocks has made a business – Senior Transition Services – out of helping folks deal with a lifetime of memories in their home, which serves as a testament to how many people struggle with this.

My wife and I are 100% guilty of these things, by the way.  We’ve looked to sell our home, but the 2008 crash knocked out 25% of our home value in one fell swoop and put about 20% of the homes in our neighborhood into foreclosure.  We’ll never see what we paid for our house and that’s an incredibly hard pill to swallow.

What about you? If you had to move tomorrow or sell your house for 20% less than you think it’s worth… could you?

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