Overview of Anchoring Bias and Selling Your House:
Anchoring bias can be one of the big obstacles to selling your house. We’ll be going over other detrimental biases in future articles. These are all covered in my Change Challenge workshops, specifically in the “Why We Make Bad Decisions” Workshop. Anchoring bias is something everyone does, with some personality types more prone to it than others. Anchoring bias often contributes to both financial loss and prolonged stress. Fixating on outdated price expectations can cause sellers to miss opportunities, delay sales, or accept less than they could have earned with a realistic approach. By staying informed, consulting professionals, and embracing flexibility, sellers can avoid costly mistakes and achieve a successful sale. The key is recognizing that, when it comes to pricing, reality—not emotion—wins every time.
Anchoring Bias in Home Selling: How Outdated Price Expectations Can Cost You.
Anchoring bias is a cognitive bias where people rely too heavily on an initial reference point when making decisions. In the context of real estate transactions, anchoring bias can cause sellers to fixate on an outdated or unrealistic price, leading to financial losses or missed opportunities, especially in a fluctuating market.
Anchoring Bias is a very common problem encountered when selling a home. In my experience, this is often the first bias in a cascading progression of others that can ultimately prevent people from selling their homes—or worse, lead to financial disaster. In certain cases, I have seen this go so far that people lose their houses to creditors. Selling a home is a complex mix of emotions, reason, and legal precedence. Most people are driven by emotion and then validate their decisions with logic. When they can’t find a logical justification, they lean on weak excuses that seem irrational to outsiders.
Selling your home is emotional and emotional decisions are often influenced by beliefs that are a mismatch with reality.
Like a superstition, anchoring bias may start as a cognitive heuristic, but often it develops into an emotional disposition. Our emotions and their effects on logic Frequently function as a closed system, reinforcing each other rather than allowing for an objective view. John Boyd famously noted that when we focus inward, we overlook mismatches with reality. These mismatches cause us to miss critical moments—like pricing adjustments, buyer interest windows, and negotiation deadlines. Time is an important variable that’s often controlled by external forces. The compounding effects of making decisions within the bounds of uncertainty, of time, and the need for proper timing creates a mental fog, making it difficult even for highly intelligent individuals to recognize their own biases.
As Edward Deming put it, “A system can’t know itself.” That’s why businesses bring in consultants—to introduce an external, objective perspective. In the home-selling process, your real estate agent serves this role, bringing logic and strategy to what is, for most people, an emotional decision.
The Impact of Anchoring Bias on Home Sellers
Anchoring bias occurs when sellers fixate on an initial price—often based on past sales, an outdated appraisal, or their original purchase price—rather than adapting to current market conditions. This fixation can lead to costly mistakes, such as:
- Overpricing in a Declining Market.
A homeowner sees that similar properties sold for $500,000 six months ago. However, the market has shifted due to rising interest rates and lower demand. (In 2025 there’s a new phenomenon that I haven’t seen before, and that’s presidential policies dramatically affecting consumer confidence, the economy, and consequently home sales.) Instead of adjusting, they stubbornly list their home at $500,000. As a result, their property lingers on the market, accumulating days on listing and becoming less attractive to potential buyers. Instead of adjusting, they list their home at $500,000, only to watch it sit on the market, growing stale. Eventually, they are forced to sell for far less than if they had priced it correctly from the start. - Missing Out on High Offers Due To Low Price Anchoring
Conversely, a seller anchored to a lower price might hesitate to investigate opportunities to sell well above their reference offer. This does not happen as much with information so easily obtainable through the internet. But I see it quite often where investors are making an offer. Usually, the investor is either making a good offer to tie-up the property, which can lead to forcing the sale at a discounted price in the future or they make a low-ball offer and are very good at instilling the fear of extremely high effort and doom. This is especially true for probate properties, and when there is a notice of default or trustee sale. I deal quite a bit with both probate sales as well as properties that are in default and those up for a trustee sale. There are many scenarios that can play out with an investor offer, a few are good and many are not.
Scenario 2: Suppose a seller expects $400,000 for their home but then realizes demand has driven prices up to $450,000. When an early offer of $425,000 comes in, they hesitate, convinced they can get even more. However, interest rates rise unexpectedly, cooling the market, and they ultimately sell for just $390,000. This is something I am seeing quite often in early 2025 caused by presidential decrees and uncertainty. - Overvaluing Personal Investments.
Homeowners often anchor to the amount they have spent on renovations, expecting buyers to pay a premium. For example, a seller who invested $50,000 in a kitchen remodel may expect a dollar-for-dollar return, listing their home at an inflated price. However, buyers don’t base offers on the seller’s investment—they look at market value. By overpricing, the seller risks scaring off potential buyers and dragging out the sale. I see this as being even more of a problem with the market changes in early 2025.
Breaking Free from Anchoring Bias
Overcoming anchoring bias requires a willingness to challenge personal assumptions and adapt to reality. Here’s how:
- Since anchoring bias is part of the human condition and most people don’t even know they’re doing it, the first step is acknowledging it.
Look for mismatches with reality. - We need to become aware of how we make decisions as well as the data we are using.
Do you have a decision-making cycle? Do you have an evaluation system to weigh the relevance of data and the probability of making a valid decision? I talk about these elements in the Evaluation Process Workshop and the Decision Cycle Workshop. - Stay Grounded in Current Real Market Data
Regularly review recent comparable sales (“comps”) and real estate market reports. Markets shift quickly, and outdated expectations can cost you. As you will often hear me say, “The Real Estate Market Is Dynamic.” - Listen to Your Real Estate Agent
Your agent is your home-selling consultant, trained to separate emotion from strategy. You can trust our expertise and data-driven insights. - Be Flexible with Pricing
If your home isn’t getting offers, don’t assume the market is wrong—adjust accordingly. Time is money, and every extra day on the market chips away at your final sale price. - Get an Unbiased Appraisal
A pre-listing appraisal can provide an objective reality check, helping you align your expectations with actual market conditions. - Recognize That Buyers Don’t Care About Your Investment
Buyers pay what the market dictates, not what you spent on renovations or what you “need” to make back. Setting a price based on reality, not personal attachment, leads to better outcomes.
I am wishing you the very best,
Andrew Ledford
Are you thinking about selling your house in the 562 or 714 area code? If so, give me a call at 562-606-1729
If I don’t pick up leave a message, this is my Google Voice number.
