Market Value and Emotional Value

Your house. It holds your precious personal possessions and memories of holiday gatherings, get-togethers with friends, and time spent with your family. It’s your home, your castle, your refuge.

Until the time comes to sell it. Then it becomes a piece of property on the market. Once you put something up for sale, it doesn’t belong to you any more. It’s a commodity in the public marketplace. At least that is the financially healthy way to see it.

One of the most challenging aspects of selling a home is letting go emotionally of your attachment to it. Back when I was selling real estate, I saw scores of deals collapse, not because buyers and sellers couldn’t agree on the purchase price, but because both of them wanted a fixture such as a painting on the wall or a chandelier. As a financial planner, I also have seen bitter battles in divorce settlements over personal property that has little financial value but huge emotional value.

It is a challenge to let go of any emotionally charged possessions. It isn’t easy to see items you remember from childhood picked over by the public at an estate sale of your parents’ possessions. It’s hard to have a garage sale because a divorce has forced you to sell your house and move.

Being unable to let go of a house or any other important possession makes it hard to set a reasonable selling price according to its market value rather than its emotional value. Just because you rocked your babies to sleep in it, a particular rocking chair isn’t inherently a valuable antique. Its worth to potential buyers may be far lower than the emotional worth it has for you.

Of course, the same concept can lead to pricing something too low. A divorcing couple, for example, may just want to get rid of an item and the emotional pain attached to it.

Before you sell anything that has an emotional attachment, it’s helpful to acknowledge that giving up this possession is painful. It’s helpful to say goodbye to it in your own way. It’s also helpful to understand that the emotional value of a physical object can be separated from the object itself. What makes most of these possessions so important are the memories we have attached to them.

A few years ago the parents of one of my clients retired and sold the farm that had been in the family for three generations. Before the sale, my client took photographs of the home place. She said, “It was a shock when I saw the pictures. They didn’t look anything like the way I saw the farm. I realized what I was seeing wasn’t the place as it looked then, but the place as I remembered it when I was growing up.”

That realization helped her let go of the farm and become comfortable with the need to sell it. Her memories, attached as they were to the past instead of the present, belonged to her and not to the land. They didn’t disappear when the land was sold.

One suggestion to help you let go of a home or other important possession is to realize that its emotional value doesn’t end when you sell it. Through your memories, you get to keep most of the value the object has had for you. At the same time, you pass on the potential of a high emotional value to the next owners who, with time and use, will almost certainly develop attachments of their own. For both of you, the sale can be an emotionally winning transaction.

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4 Responses to Market Value and Emotional Value

  1. Richard Trachtman March 14, 2011 at 7:53 am #

    Separating market value from emotional value is, indeed, important. It helps to understand this when one wants to sell, but also can be an important in deciding whether to sell or to hold onto something; or whether to pay more for something than others might pay. Anyone who watches the Antiques Road Show will be familiar with scenarios such as this: someone brings in an item which has been a family heirloom for appraisal and finds out that it is likely to sell for a surprisingly huge amount at auction. The owner is very gratified to know this, but says that she intends to keep it in the family and will now be sure to take better care of it in the future. In that case emotional value outweighs market value. In a divorce, holding onto a home for the sake of young children’s emotional stability may outweigh what anyone else would be willing to pay for something that, to them, would be just a house. Similarly some people will use their money to preserve or protect a threatened habitat for emotional reasons that have nothing to do with economic value, and will outbid buyers who want to develop the same land for profit. Sometimes letting go of what one is attached too is just too emotionally costly to justify.

  2. Kelly Sullivan Noah March 16, 2011 at 10:23 am #

    Great illustration, Rick. I think that differentiating between emotional value and market value is one of the most important ‘hidden’ ways a good advisor brings value to a client. This reaches beyond real estate to areas such as:
    • Clients’ businesses and their products (blood/sweat/tears vs. dollar value to customers)
    • Life insurance (sentiment for the person vs. their economic impact)
    • Inherited or long-held investment assets (history of that asset vs. purpose of holding it in their portfolio today)
    • Higher education (being educated vs. impact on individual earning power)

    As you say, financial health relies on seeing both sides of this value equation, and understanding that the two sides – while powerful – are distinctly different.

    Thanks for the thoughts…always look forward to your articles.

    Kelly J. Sullivan Noah, CFP®

  3. Don Martin, CFP March 18, 2011 at 1:59 pm #

    You are correct that investors need to have a detached view about assets that need to be sold so that they will be free to sell them quickly and efficiently. I saw the same phenomenon years ago when I was in real estate lending where home sellers misbehaved because of emotional attachments to real estate, resulting in transactions not occurring because the seller would not cut the price. Now that I’m a fee-only NAPFA member financial planner I see the same type of investor misbehavior where they don’t want to sell assets at the top of the market. Perhaps consumers should own REITs instead of directly owned rental property so that they can sell more easily when it is appropriate to sell.

    Don Martin


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