Frisco Texas Mortgage, Real Estate, Events, and more

Are You The Reason Your Home Won't Sell? Sunk Cost Fallacy


In the below post, James Barath of Benchmark Mortgage shares an article WORTH the read. Definitely a good reblog.

If you have a homeowner that feels their house is worth more than the market value, then this is the article for you.


Yesterday, I had the opportunity to provide a free mortgage consultation to a family in Northwest Indiana who had their home listed for sale. Many things were discussed as-is par for the mortgage planning process and it was refreshing to see a home buyer take the preliminary steps to see if they were actually qualified to buy the next home.

The focus of the mortgage consultation became awkward as the facts revealed that they needed to sell their existing home because they had to scale down due to financial hardship. Here was the real issue. The home had been on the market for well over 9 months and this family was fixated on getting a certain amount of money from the sale based on what they had invested into their home over the past 12 years.

In my analytical nature, I tried to explain to them why they needed to sell sooner as opposed to later. I highlighted the pros and cons of buying and selling in today's real estate market; illustrated the law of diminishing returns; examined the principle of carrying costs; and also expressed the potential credit nightmare ahead.

Guess what? This family just did not get it.

Later in the day following the consultation I stumbled upon an article on titled "Are you the reason your home won't sell" by Marilyn Kennedy Melia. It had the answer to my clients reluctance.

In the article, Marilyn introduced a concept called Sunk Cost Fallacy which is at the heart of what behavioral finance experts declare is the irrational behavior that makes home owners hold onto a home when they know they really need to sell. Often times it results in a greater loss than is necessary.

It is hard to believe that this type of behavior is just limited to homeowners in Northwest Indiana.

Are You The Reason Your Home Won't Sell? Sunk Cost Fallacy.


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Texas Home Loan Expert

Frisco TX Mortgage



The views expressed on this site are mine alone and do not reflect the views of my employer.

Comment balloon 7 commentsJohn Cannata • December 09 2009 09:37AM


Morning John,  Whatever you call it the result is the same - sellers who have an uncanny knack for keeping their house well above market !

Posted by Bill Gillhespy, Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos (16 Sunview Blvd) over 9 years ago

Good idea for a re-blog John. Sometimes people on both side of the transaction are unrealistic about things. No matter how hard I try to communicate the reality of the situation to them sometimes they still just don't get it. I take it personally too because it's my job to help these people.

As they say, you can lead a horse to water but you can't make 'em drink. But I'm trying to learn as much as I can as fast as possible so I increase the odds of their success while working with me. Have a good day.

Posted by Nathan Tutas, Your Central Florida Real Estate Expert (Tutas Towne Realty, Inc.) over 9 years ago

Bill - Unfortunately, they wont realize it until they have lost even more money.

Nathan - Ultimately it will be what the appraiser feels the value will be. Doesnt really matter what the customer thinks, but at the same time we have to get them to realize that so the list price is reasonable. Easier said than done in some cases.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 9 years ago

Not a pretty picture; but I did recently witness a transaction close at price I would never of imagined considering the market ~ that's real estate.

Posted by Teral McDowell (Referral Patners LLC) over 9 years ago

Teral - Some people just are not well informed.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 9 years ago

John - Thanks for the re-post. The odd thing is that I have actually used this new found terminology twice in in as many days with not only a homeowner, but also with a Realtor. Thanks again and it was great speaking with you today.

Posted by James K Barath, CMPS, FICO Pro, Certified Military Housing Specialist (Canopy Mortgage, LLC) over 9 years ago

Mr pleasure James. I felt it was good information and wanted to share it with my readers as well. Thanks for the original post.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 over 9 years ago