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Overvalued - Undervalued and the matter of Emotions

By Joe Spake | February 3, 2011

I don't usually put much stock in the pundits' pronouncements and predictions about local housing values and market conditions,  but we humans seem pretty comfortable with little formulas and algorithms that make decisions for us.

CNN Money's article on America's most overvalued and undervalued cities addresses  a number of housing markets, mostly from the perspective of investors, with information from Local Market Monitor, a  firm that provides investors with analysis on local conditions.

Economic equilibriumFor the purpose of valuation, an equilibrium price is determined, based on economic and population growth, construction costs, vacancies, household income and interest rates. That data is crunched with an "X Factor" (based on 20 years of  market data). That's a value company founder Ingo Winzer comes up with based on 20 years of market data.

While Local Market Monitor may be able to give a well-reasoned, economically based buy-sell order to investors, buyers and sellers in the residential real estate arena act quite differently, because of an added critical variable in the equation - EMOTION.

Emotion can manifest itself in many ways during the home selling process:  an agent can review a pile of comparable sales, market trends, and absorption analysis, with a seller,  only to get the response, "my house is worth more than that.  I don't care what your facts and figures say."

The same goes for pre-listing  staging and home preparation advice.  Agents have paid good money to have professionals stage a house, only to have the homeowner put everything back like it was as soon as the stager left.

seller emotion
Who cares about stinking evaluations - it's my home we are talking about?

Good agents know how to walk the tight rope of client emotions, and temper those feelings with facts and professionalism. The real estate professional who doesn't understand that home buyer's buy primarily on emotional response, probably won't  last long.  You can present the features and amenities of a property, but in the end, it is the sizzle, not the steak, that closes the sale.

Joe Spake is noted and quoted expert on social media and real estate topics at the national and local level. A syndicated consultant, Joe is also a licensed real estate broker with Revid Realty in Memphis, Tn.

Joe is a leading area consultant for small businesses, non-profits and individuals via his company Spake Communications. He is also co-founder of Social Web Learning and is a product consultant for Telivant.

Joe has began engaging with leading edge technologies in the mid 1990s, utilizing online marketing for his real estate business.He is an experienced presenter of marketing, technical and social media content and has authored courses and developed course content to enhance the use of technology and social media for business professionals.

Joe is one of the most "wired" real estate experts you will run across, and always willing to lend a helping hand to those who want to traverse the digital real estate potential.
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