Many home sellers are losing money ... precisely because they're determined not to lose money. So why won't your home sell?
One reason homes are languishing on the market is because owners are suffering from "sunk cost fallacy" observes Ohio State University economist John Kagel.
A condition recognized not by physicians, but rather by behavioral finance experts, this fallacy describes the reluctance people have to selling for less than they've paid or put into a home, even when hanging on, waiting for the right price, will ultimately prove costly.
It can be hard to shake this faulty logic, even when homeowners' income has dropped precipitously or they're living off a limited amount of money, like a severance package, says financial planner William Suplee of Structured Asset Management, in Paoli, Pa.
Here are three questions to determine whether you could benefit by losing money on a home sale:
1. Will you slash your housing costs with a move?
Owners under financial pressure who could find relief on their monthly cash flow by moving to a lower-cost home that they either buy or rent are the ones grappling with the sunk cost fallacy.
Suplee tries to help owners get clear view of their best option by preparing spreadsheets that lay out the costs of different living arrangements.
Don't forget all the ancillary expenses, like commuting costs, that go along with a particular housing choice, adds Lexington, Ky., financial planner D. Scott Neal.