Suppose Ann bought a well-maintained house for $765k. Suppose Ben bought a fixer-upper for $750k and then spent 30k on kitchen, bathrooms,,, until it looks like Ann’s, slightly newer in the renovated parts, but slightly older in the untouched parts.

Now they are both selling, at the same location. Q: which position do you prefer?
%%A: Ben. As Ben I can easily separate the renovation cost from the investment, so (Assumption 1:) my investment amount was 750k. I can more easily accept a 755k offer. I can even accept a $750k offer.

I would explain to myself that my $30k renovation is for myself, not suitable for every buyer, and probably not appreciated by the next owner, who might decide to redo everything. In other words, renovation cost is not an investment having a chance of appreciation. Instead, renovation cost is an expenditure.

To Ann, the entire 765k is investment, so she expects some appreciation or at least break-even. In a down market, she may be forced to sell at 755k, a bitter pill to swallow.

The paradox — Ann bought an equivalent asset cheaper than Ben, but has more problem selling.

• At 755k, she feels more disappointment about a small loss than Ben feels, based on Assumption 1.
• .. It’s harder for Ann to explain away the loss as Ben “I made a $5k profit, while the 30k renovation is an add-on improvement I did for myself, not for the next buyer.”
• At 770k, she feels less accomplishment about a modest appreciation than Ben feels.
• Ann may set a higher, more challenging target price than Ben, based on Assumption 1.

— a minor reason to favor “Ben” .. the 30k renovation is customized for Ben. In Ann’s case and in my own experience buying a resale home, the renovation, the decor, the layout… are all customized for the previous owner 🙁 Some buyers don’t mind that.