Are you overestimating your home’s value?

As a homeowner, you know the time, money and energy you have invested into your home. You might even have a sense of what your property is worth. What if you are wrong, though? What if you see your house through “homeowner goggles” and have overestimated how much it will sell for on the open market?

In spite of low interest rates and a still-strong housing market, recent data from the Quicken Loans Home Price Perception Index indicates that homeowners tend to be optimistic regarding the true value of their property. In fact, appraised values nationally averaged 2.17 percent lower than what homeowners expected. Quicken Loans calls the widening gap between homeowner expectation and appraised values a “continuing trend.”

Although Caryn Shoemaker, owner of Tribay Appraisal in San Jose, says that Bay Area sellers are currently likely to marvel at how much more their homes are worth than they estimated, it is no guarantee that it will be true for everyone. Given the red hot market and stories of friends and neighbors who have made a killing selling their homes, it can be a particularly tough pill to swallow when a professional tells you that your house is worth less than you thought.

In his 16 years as a Realtor, David Gunderman with Alain Pinel Realtors in Oakland, has found that homeowner overestimation “happens with some frequency.”

Gunderman offers potential sellers an honest estimation of their home’s worth, regardless of what they may believe the property will fetch. “You have to stick to your truth,” he said. “The most dangerous thing that can happen to that homeowner is to become married to an agent who tells them what they want to hear.”

If Gunderman is unable to convince a potential client by using applicable current data and market knowledge, he moves on. “The hard thing is that some sellers think pricing is a subjective thing. But after you’ve been doing this long enough and with enough success, you get an idea of what the market will accept.”

Fellow Realtor Toni Viscomi with Intero Real Estate in Saratoga says that the inherent danger of stubbornly sticking to an inflated asking price is a house that simply will not sell.

Like Gunderman, she has also run into sellers with an artificially high sense of what their home is worth. According to Viscomi, “A good agent won’t take that listing because it’s a waste of time. Overpricing your home will slow things down.”

It is understandable to believe that the general public will love every aspect of your home as much as you do, but the temptation to ask them to pay more than it is worth can cost you money. Gunderman said, “The first week on the market is where you have the greatest impact. As soon as your house has been on the market too many days, comes back on the market, or you change agents, it starts to erode the value of your home.”

That eroded value occurs because buyers see a home that has lingered on the market as damaged property and are likely to offer less for it. Even if you do not initially agree with a Realtor’s assessment of your home’s value, a well-priced home will prove itself by selling quickly, says Viscomi.

Like Gunderman, Caryn Shoemaker has been in the business for 16 years. During that time, she has watched the Bay Area market ebb and flow and understands how much property values impact the average homeowner. “I once had a bad home appraisal myself,” Shoemaker said. “I don’t mind talking to a borrower, and I try to be understanding.”

As Shoemaker sees it, homevalue confusion occurs when a homeowner sees that the house across the street sold for a particular price and believes that because their home is similar, it must be worth the same. “Maybe the other house was rebuilt or had upgrades their home doesn’t have,” she said.

The truth of the matter is, some upgrades are ultimately more valuable than others. According to Shoemaker, minor upgrades like plumbing and light fixtures are worth less in the eyes of an appraiser than an upgrade that “cannot be removed and taken with them,” like a new bathroom. No matter how new, a solid surface counter is more valuable than tile and Brazilian hardwoods worth more than standard floors.

Gunderman said that however well intentioned, homeowners are not always in tune with what consumers are looking for. He describes clients who invested thousands of dollars into building aesthetically-pleasing retaining walls on a secondary lot when buyers would have been just as happy with the natural slope of the property. Their hearts where in the right place, but the changes were not necessary.

“Home buying is an emotional experience and buyers are in the home for a very short time,” Gunderman added. “First impressions are important so sellers should try to spend money on things that offer an emotional impact. If they fall in love with the space they will forgive a whole lot of work under the surface.”

That is where trusting a professional to give you an honest estimate of your home’s value and the best advice as to which improvements will help sell your property comes into play.

“You always want to spend a dollar to make two dollars,” Gunderman said. Toward that end, he encourages his clients to call him prior to making home improvements, particularly if they plan to put their home on the market.