How Overpricing Shows Up in Kauai Real Estate

In my last video I discussed the Endowment Effect when it comes to pricing your home for sale. So what does the Endowment Effect actually look like when someone lists a home? 

One place it shows up is with improvements. The seller often views improvements on the property on a dollar-for-dollar basis. Kitchen remodel? Add $150,000 to the list price. New landscaping? Add another $50,000. Carpet replaced three years ago? Add $15,000. The seller assumes those expenses should be recovered. 

But that’s not necessarily how buyers see it. 

The seller values the investment. The buyer values the result. And those are not always the same thing. 

Typical Pattern of the Endowment Effect

First, the seller anchors to a specific price. Second, the property enters the market above buyer expectations. Third, showings happen, but offers do not. Sometimes there aren’t even showings. Fourth, days on market begin to accumulate. Fifth, price reductions occur. And sixth, the property often sells near where the market indicated value in the beginning. Or the property is pulled off the market. 

Sometimes it sells with the second or third listing agent because the seller viewed the lack of activity as the agent’s fault rather than a pricing issue. 

The Cost of Overpricing

Study after study has shown that overpricing creates friction, lengthens time on market, and widens the gap between what sellers expect and what buyers are willing to pay. 

To be fair, there are times when the Endowment Effect wins. I’ve seen it happen. In more than 22 years of selling real estate, there have been markets where inventory was extremely low and buyers had very few choices. In a strong seller’s market, a seller can ask more than the data supports and still find a buyer willing to pay it. But those situations are the exception, not the rule. 

At the end of the day, value is determined by what a willing buyer is prepared to pay. And today’s buyers are educated. Before they ever schedule a showing, they have access to photos, comparable sales, neighborhood information, and let’s not forget ChatGPT. 

A property may mean a great deal to its current owner, and that’s understandable. But the real estate market is ultimately looking at what that property offers to the next owner. 

Understanding that distinction is often the difference between a property that sells and a property that sits. 

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Aloha!  

Lynda Gill RS Lic. 63088  

Hawai’i Life Real Estate Brokers 808.346.0056  

LyndaGill@HawaiiLife.com