I sat with a seller in Peoria not long ago and asked the question that the week of closing usually forces people to face. The home had been on the market for a while. The offers had come in lower than the list price, and every one of them felt like a small defeat. So I asked, gently, what number would actually make this deal work for them.
Their answer surprised me. It was not tied to the market, or the comparable sales, or what they needed to move on to the next chapter. It was tied to a number that had been set months ago, on a day when the market looked different. And when I asked why that number mattered so much, the answer came back almost word for word: “Because we've already come this far.”
Let's think through this, because that sentence has quietly cost more money in real estate than almost any other I hear.
What Sunk Cost Actually Is
The sunk cost fallacy is the tendency to keep investing in something because of what you have already put into it, even when the smartest decision is to stop. It is the reason people stay too long in jobs they have outgrown, hold positions that keep falling, and finish meals they no longer enjoy. The money, time, or effort you have already spent is gone. It cannot be recovered. The only question that matters is what happens next.
Here's what I'd be asking if I saw you walking into a real estate decision with that mindset: are you making this choice based on what is true today, or are you making it to justify what you have already spent?
The Two Faces of the Trap
For buyers, it shows up after the inspection. You have paid for the inspection. You have paid for the appraisal. You have paid for the option period, the loan application, maybe the earnest money. Then the inspection comes back with a foundation crack or a roof near the end of its life. The rational calculation changes. But the money you have already spent makes walking away feel like throwing it away, so you convince yourself the repairs are manageable, or that you will deal with them later. I have watched buyers spend an extra $30,000 fixing problems they saw clearly on day one, because walking away felt like a wasted investment.
For sellers, it shows up as a stubborn price. You invested in staging. You invested in repairs. You have paid the mortgage and the taxes while the home sat. The market in much of the Phoenix metro has shifted, and about half of all active listings in the region now carry a price reduction. None of this is a judgment on your home. It is just where the market is. But dropping the price feels like admitting the earlier number was wrong, so sellers often hold, waiting for an offer that matches a price the market has already passed by.
Let's separate emotion from fact. The money you spent on staging, the months of carrying costs, the original list price. None of it changes what the market is willing to pay today. That is the hard part, and it is exactly where the trap lives.
Why We Hold On
There are a few things I'd want you to consider about why this happens, because understanding it is the first half of beating it.
We treat past investment as a vote for continuing. Our brains are wired to avoid loss. Reframing all that spent money as “wasted” feels worse than spending a little more to make it feel justified. So we invent reasons the decision was sound. The inspection issue becomes manageable. The price just needs a patient buyer. The evidence that should change our mind gets quietly reframed to support continuing.
We are anchored to the number we set when we were less informed. That original price was set, in many cases, when the market looked different. Holding to it is not discipline. It is loyalty to a decision made with old information. The better question is not “Is this the price I wanted?” It is “Is this a price a well-informed buyer would agree to today, or is it a price I am attached to for my own reasons?”
We confuse past effort with future value. The staging, the repairs, the photos, the weeks of showings. All of it is genuinely valuable. But none of it changes what a buyer will pay. Effort is not the same thing as market value, and the sunk cost fallacy is exactly the confusion between the two.
The Real Cost of Coming This Far
Let's zoom out for a minute. Sunk cost does not just cost you the money you already spent. It costs you the money you keep spending while you refuse to change course.
A seller who holds a price the market has moved past is not only forgoing the offers sitting on the table. They are paying the mortgage, the taxes, the insurance, the maintenance, month after month, for a home that is not being sold. In the current market, where homes in parts of the valley can sit for months and days on market have stretched well past where they were a few years ago, holding on does not protect the price. It quietly converts what should have been a sale into a slowly growing expense.
A buyer who pushes through inspection findings to avoid wasting the money already spent is not protecting an investment. They are committing to one that will keep taking money long after closing. The few thousand dollars you might “lose” by walking away is almost always smaller than the tens of thousands you stand to spend on problems you already know about.
That is what's at risk if you stay anchored to the past: not yesterday's dollars, but all the dollars ahead of you.
How to Decide Going Forward
The way out of the trap is not complicated, but it takes discipline. You have to stop asking what you have already put in and start asking only one question: given what is true today, is this still the right move?
Write down what you cannot get back, and then put it aside. Naming the money you have already spent helps you see it for what it is: gone. Once you have written it down, it stops being a reason. It was the cost of information. You paid it to learn what you know now. What you do with that knowledge is where the real decision begins.
Ask the forward-looking question on paper. Forget the list price, the inspection fee, the months of carrying costs. Ask: if I had not spent a dollar yet, would I make this choice today? That single question cuts through sunk cost better than any amount of reasoning, because it strips away every excuse built on the past.
Ask “what's the risk if we're wrong?” For the seller holding a price the market has passed, what is the risk of holding a few more months? You can add it up in carrying costs and lost time. For the buyer pushing past inspection findings, what is the risk of being wrong about a roof or a foundation? You can price that too. When you put an actual number on the downside, the emotional attachment to past effort starts to look very small next to it.
Bring in someone who did not spend your money. This is the quiet value of an advisor in a decision like this. I did not pay for your inspection, and I did not set your list price. I have no need to feel right about either one. My only interest is what serves you from here. When the people around you are invested in decisions that have already been made, you need at least one person whose loyalty is to where you are going, not to what you have already done.
The Decision Belongs to the Future
I have been in this business for 14 years, and I have seen the sunk cost trap cost people more than almost any other mistake. I have watched a seller lose the best offer they would receive while waiting for one that never came, all to avoid the discomfort of admitting an earlier number was wrong. I have watched a buyer commit to a home that needed more than they could afford, all because the inspection fee felt too expensive to waste. In both cases, the person knew, somewhere underneath, that the decision did not make sense anymore. They just could not separate what they had spent from what they would still lose.
Real estate decisions deserve to look forward. The money is spent. The past is behind you. What matters now is whether the choice you make today is one you will still feel good about years from now, and the good news is that you are still free to make that choice well.
If you are holding on to a decision because you have already come this far, whether you are buying, selling, or investing, I would welcome the chance to look at it with you honestly. We can separate what you can no longer get back from what is still ahead, and build a plan that points you forward instead of backward.
Respectfully,
Andrew Glenn
Designated Broker, My Home Group