The 'Friction Tax': Why Buyers Overestimate Repair Costs

In Orlando’s luxury real estate market, buyers often overestimate repair costs by two to five times the actual price, a phenomenon broker Bent Danholm calls the “friction tax.” Danholm, founder of Danholm Collection, a Central Florida brokerage specializing in homes above $1.5 million, explores this concept in his new book, The Architecture of Demand. He explains that when buyers see visible issues—worn floors, unfinished rooms, dated finishes—they mentally deduct not just the repair cost but also the uncertainty and hassle of managing contractors, scheduling, and waiting. This inflated discount can significantly reduce offer prices, especially for larger problems where a $50,000 repair might be perceived as a $150,000 issue.

Danholm advises sellers to address big, visible problems that trigger large mental discounts, while handling smaller items through pricing or credits. He suggests walking through the home as a buyer would, getting real estimates for major repairs, and fixing what’s likely to cause the most hesitation. For smaller issues, offering a credit—even one that reflects the buyer’s larger estimate—can be more practical than rushing repairs. Danholm also notes that friction isn’t limited to repairs; dated layouts or confusing spaces can create similar hesitation. His goal is to reduce friction before buyers make offers, so they react to the home itself rather than a list of worries. Sellers can start by getting a home valuation that considers condition, recent sales, and competing listings.

Ultimately, buyers rarely discount a problem by its actual fix cost—they add uncertainty and effort to the equation. Sellers who understand this can make smarter decisions about what to repair, what to credit, and what to leave alone, potentially preserving more of their sale price.