Monday, February 24, 2014

Real Estate Physics


Real Estate Physics

There are certain principles that we hold to be unalienable truths.  A unit of mass at rest will stay at rest.  A unit of mass in motion will stay in motion.  These are basic rules of physics.  If A happens, we know B to be true.  Unfortunately, the laws of physics will never apply to real estate transactions.

When buying a home, an individual will feel it is their obligation to negotiate the price.  Regardless of whether it is a buyer’s or seller’s market, a buyer will always search to see what room there is for negotiation.  Other than automotive sales, it is the only industry where it is an accepted norm to haggle on the price.

The funny part, though, is this same logic does not apply when they turn around years later and try to sell.  The same person that felt the home they were buying was overpriced at purchase will then  try to top the market for the highest possible value when they try to sell it.  Additionally, they will often get indignant when someone new attempts to haggle and offer a lower price.

Why does this happen?  Why does the mass at rest not stay at rest?  Why must we feel the boulder should roll uphill when we find ourselves as the ones now forced to push it?  I find the answer to be as simple as personal attachment.  As opposed to other retail purchases such as televisions and appliances, we find ourselves exceptionally attached to our homes.  It is like a pet.  It is a reflection of ourselves.  We have poured our souls into them.  Many celebrated life events occur there.  Our kids are born and raised there.  We improve our homes to reflect our changing personal circumstances.  Get a raise, redo the kitchen.  Your child graduates high school or college, throw a party.  You become empty nesters and have the home alone for just you and your spouse?  Well, that’s a story for a different web site.  Anyway, people tend to treat their homes as if it is a business for sale instead of an asset for sale.  They feel there is a degree of personal goodwill that has value above and beyond the sticks and bricks that should be readily apparent to every buyer that comes through the door.

Unfortunately for the seller, there is no extraneous goodwill in the sale of real estate.  George Washington did not sleep in your home.  Neither did Bill Clinton.  In fact, the day someone decides to sell their home, they need to realize that it stops being their home.  Whether they like it or not, they need to look at their residence through a very dispassionate lens.  They need to stage the house to make it acceptable and attractive to the greatest number of buyers.  Paint the exterior a more neutral color.  Get rid of the kids’ height markings on the laundry room door.  Clean out the garage.  Personal memories need to be boxed up.  No one is buying someone else’s nostalgia.

This, though, is easier said than done.  The emotional detachment you displayed for your purchase is difficult to accept on your sale.  Human nature does not have the same principles as physics.  If it did, though, we may all find it easier to buy and sell homes.

Until next time…

Keep kicking the dirt!

Jeff Gersh is President of Gersh Consulting Services, a real estate advisory firm, headquartered in Orlando, FL.  He may be reached at jsgersh@gmail.com or 407-468-9328

 

 

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