For Sale, By the Owner's Ego

Karyn LeBlanc said she was "a little crushed" to find out her condo's market value. (By Nikki Kahn -- The Washington Post)

"I just need time to emotionally deal with the price drop," she wrote in an e-mail. "EGO. Not greed."

The difference in the ways that real estate investors vs. ordinary home sellers are reacting to the market can also be seen in national trends. Last week, the National Association of Realtors reported that nationwide, the median price of existing homes, sold mostly by people who live in them, fell 2.2 percent in September compared with September 2005, dropping to $220,000 from $225,000. The median is the point at which half the homes cost more and half cost less.

The next day, the Commerce Department reported that home builders -- in business to make a profit -- had more aggressively cut their prices. The price of new houses declined 9.7 percent in September, compared with the same month a year earlier. Analysts said that cutting prices helped boost sales after a slow summer.

Neuroeconomic research may provide buyers and sellers with some clues about how to psych out the market themselves.

Sellers, neuroeconomist McCabe suggests, might need to realize that no matter how passionately they wish things were different, prices have fallen and they need to accept that. They can hold on and wait, but may actually lose more money by making payments on a home in a place they no longer want to live -- in effect, throwing good money after bad.

Buyers, he said, need to be aware that they are dealing not just with a house but also with a seller wrestling with his ego. Sometimes it might be smarter to let the poor fellow keep his price, but ask for other concessions that might actually be more valuable. A new roof, new appliances or substantial assistance toward the closing costs all have material value, but they allow the seller the dignity of maintaining the price at a level that leaves him standing tall in his neighbors' eyes.

"Haggle less over price and more over other stuff," McCabe said the research indicates. "Change the bargaining so you still get the deal you want."

Of course, real estate agents say they haven't needed research laboratories to teach them about buyer and seller behavior.

"You always view your house as more valuable than the numbers will justify," said Owen Heine, a real estate with Sager Real Estate in Strasburg, Va. "Every person views his house as a castle. It's human nature to love what you have."