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Priceless: Why do so many sellers overvalue their homes?

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Our homes, understandably, mean a lot to us. They may reflect our tastes and personality. They may hold cherished memories or favored heirlooms. They often comprise the bulk of our financial fortunes. And when it comes time to sell them, sometimes we can’t understand why other people don’t consider them as priceless as we do.

It can be hard for a real estate agent to convince sellers that their beloved home might not be as desirable to buyers as it is to them. As Ken Sazama, owner and broker at Sazama Real Estate in Jamaica Plain, tells all of his clients, “Every seller thinks their house is like their dog — it’s extra special.’’

Overvaluing our possessions, including our homes, is a common and perfectly natural instinct — one that psychologists call “the endowment effect.’’ One driving force behind that behavior, said Boston University marketing professor Carey Morewedge, is the principle of loss aversion. Humans are much more sensitive to losses than to gains: For most people, losing $10 feels worse than winning $10 feels good. In fact, a loss hits us with about twice the emotional impact. “Winning $40 is about as pleasurable as it is painful to lose $20,’’ Morewedge explained.

“When we feel like we own something, we adopt that as our reference point or the status quo,’’ Morewedge continued. So when we think about selling our home, that change feels like a loss, a subtraction from our baseline, and we tend to focus harder on what we’re giving up than what we might get in return. “That idea of loss aversion, the psychological pain of giving things up, can increase the valuation that we attach to things,’’ he said.

But in the case of our homes, perhaps an even more powerful principle at work is the idea of psychological ownership. “When we acquire something, we tend to build an association or attachment between the good and ourselves,’’ Morewedge said. Our homes become an extension of ourselves and part of our identity.

“You might have raised your children in that home or you might have gone through major career accomplishments in that home or there may be important holidays that you celebrated there,’’ Morewedge said. “So giving that thing up feels like losing part of yourself, as it serves as a bridge between you and those important things that you consider a part of who you are.’’

Michelle Oates, an agent with Coldwell Banker in Andover, said most sellers are responsive to the pricing data and advice she offers, but she recalls one understandably sentimental seller — a widow parting with a longtime family home — who insisted on a list price $100,000 higher than Oates suggested. “She had a lovely home, but the floor plan was not well-suited for today’s buyer — lots of small rooms — and she couldn’t seem to see that with her small, dated kitchen and baby-blue bathroom, she couldn’t compete with other homes in that price range,’’ Oates said. “She just couldn’t see her home through the eyes of others, because she was so wrapped up in her family memories and pride.’’

Another reason sellers and buyers may not see eye to eye is that homeowners adapt to their environment, sometimes developing a blind spot to their home’s flaws. For example, cigarette odor is a huge turnoff to most buyers, said Marie Presti, owner and broker at the Presti Group in Newton and Stoneham. But smokers — and, in some cases, even their nonsmoking spouses — often don’t notice the smell, she said.

Likewise, families with pets are sometimes unaware that the mudroom or living room rug smells like their dog or cat. “People have pets in the house, and they don’t realize that when you walk in there’s a distinct pet odor — that’s a big thing people get turned off by,’’ Presti said. It may just be a single throw rug your pet likes to laze on, but buyers leap to assumptions pretty quickly, Presti added. “If they smell a dog and they’re not a dog owner, they could think the whole house is filthy when it’s really not.’’

As anyone who’s found a way to make life work despite minor annoyances can tell you, it’s pretty easy to get used to tight quarters or ugly countertops — and thus underestimate their negative effect on buyers. “The things that we tend to adapt to are the things that are constant,’’ Morewedge said, such as a home’s size, layout, or fixtures — “things that sort of become our constant and are static and sort of fade into the background.’’

Another reason sellers and buyers may not see eye to eye is that homeowners adapt to their environment, sometimes developing a blind spot to their home’s flaws.

Not only do we grow accustomed to our home’s shortcomings, we also lose track of time when engrossed in our daily routines. Presti offers the example of sellers who had their home painted 12 or 13 years ago. “There could be chipping, peeling paint out on the exterior when you first drive up,’’ she said, which buyers will interpret as a lack of upkeep. The sellers, meanwhile, may not even notice it. “Because they think, in their head, they just had it done,’’ Presti explained. In such situations, she’ll press the owners, asking them to think hard about when, exactly, they last had the house painted — and they’ll remember it was the year their teenage son was born.

“I can’t tell you how many times I’ve heard owners say, ‘Well, the kitchen’s not that old,’ ’’ Presti added. “I say, ‘OK, tell me when it got put in’ — because I can see it’s clearly 20 or 25 years old. If they’ve lived there for 40 years, that’s new to them.’’

And even if the kitchen is new, there’s no guarantee other buyers will appreciate it the way you do. People tend to be pretty egocentric, Morewedge said, so they may overestimate the extent to which other people share their preferences and design sensibility. “The tiles that you brought back from your vacation and used to decorate your kitchen may hold special memories for you, but may actually be a disincentive for others to buy,’’ he said.

Some homeowners, Presti said, can get a fantastical number in their heads after talking with neighbors, who hold the same inflated regard for their own homes. “People get a preconceived notion of a certain number in their head because it came from somebody else,’’ Presti said, even if the person doesn’t know anything about the real estate market.

Meanwhile, price estimates from websites like Zillow or Redfin can be way off in a market like Boston, where the housing is often older and more disparate than in other parts of the country, according to Presti. Online estimates also can’t account for things like loud overhead air traffic, a busy intersection, or peeling paint, Presti said. “Zillow doesn’t know any of that.’’

(Zillow said its Zestimate is a starting point for determining a home’s value, not an appraisal. “It includes millions of data points, statistical models, and lines of code, and we’re always adding new data points and taking advantage of new technology — it can even ‘see’ unique home features and finishes in listing photos now,’’ said Haley Johnson, communications coordinator for Zillow Group. “We always recommend people work with a local real estate agent when it comes time to buy or sell their home.’’)

There are any number of reasons sellers might have unrealistic price expectations, said Adam Rosenbaum, an agent with Century 21 Adams KC in Arlington. Some may be hoping to recoup remodeling costs, while others may have heard hyperbolic tales of bidding wars played up by local realtors and media coverage. “But much of the thinking boils down to greed,’’ Rosenbaum said.

Money can definitely distract people from rational thinking, said Shirley Chatelain, an agent with Coldwell Banker in Newton. “Your home is an investment, and so whenever you think you can get more money, that’s what you’re focusing on,’’ Chatelain said. “And I think this tends to blind the seller from thinking, ‘OK, well, maybe my neighbor got over asking because they actually take care of their home, it’s updated, or it’s a newer home than mine.’’’

And yet, overpricing one’s home can backfire in a busy market like Boston’s. Sellers who insist on a high list price, hoping it opens up negotiating room, are taking a risk, Chatelain said. “If you don’t sell your home within a timely manner, it becomes a stained listing,’’ she said. “When buyers notice a home that’s been on the market for a long period of time, they begin to question, ‘What’s wrong with this property?’ ’’ — and sellers can expect lowball offers.

Overpricing is less detrimental in a hot market, like this one, that continues to find new peaks, Oates said. “Right now some sellers are actually pleasantly surprised when I suggest a price,’’ she said. “The real problem is in a depreciating market, because sellers are fixated on the value of a neighbor’s home that sold last year, an appraisal value from when they last refinanced, or the advice of a family member or co-worker who’s out of touch with the current market.’’

Morewedge said there are strategies to dampen the endowment effect, such as redirecting sellers’ attention to negative aspects of their homes or asking them to think in specific terms about what they could do with the money from a home sale.

“When I walk into a seller’s house, I need to be honest,’’ Chatelain said, which can make for an uncomfortable conversation at times. “But it’s something that you need to do, because they’re hiring you to sell and market their home.’’

Presti, who teaches a real estate class in comparative market analysis, explains to sellers in detail how she arrived at her estimated value. Most accept her assessment, but some still insist on a higher list price. Sometimes Presti will accommodate them — with one important caveat. “If I agree to take this on at this price point,’’ she tells them, “I want you to agree that if it goes three weeks and we don’t get any offers that are acceptable to you, then we drop the price.’’

The bottom line, Rosenbaum tells clients, is that buyers ultimately determine a home’s value, not the seller.

“It doesn’t matter what they paid for the house or what they put into the house, but only how much someone else is willing to pay for their house,’’ he said. “It’s not easy to diplomatically assert that point, and it’s often harder for sellers to really hear it.’’

Jon Gorey blogs about homes at HouseandHammer.com. Send comments to jongorey@gmail.com. Follow him on Twitter at @jongorey. Subscribe to our free real estate newsletter at pages.email.bostonglobe.com/AddressSignUp.