It’s natural for us to assign greater value to things we own. This phenomenon is known as the "endowment effect," a theory introduced by American economist Richard Thaler in 1980. One of the classic studies illustrating this effect involves coffee mugs: Group A is shown a mug but doesn’t receive one, and they are asked how much they’d pay for it. On average, their answer is $4. Meanwhile, Group B is given mugs and then asked how much they would need to be paid to part with them. The average response here is $8.

This effect is often seen in sellers as well. Even when shown that similar homes have sold for less, and competing homes are priced lower, sellers still want to price their homes higher. The negative consequences of the endowment effect are that homes take longer to sell, the price ends up “chasing” the market and sellers eventually end up selling for a lower amount than if the house had been initially priced correctly.

Sellers should be mindful of how the endowment effect can influence their pricing decisions. Instead of relying on personal assumptions about the home's value, it’s important to base your pricing on actual market data. Give me a call if you need a Realtor to help you price your way to a successful sale!

Donna Forest M: 603-731-5151 donna@donnaforest.com Follow her on Facebook