IMO many people don’t understand the difference between a hallucination, an illusion, and psychosis. Also many people assume that severe mental illness like schizophrenia is a requirement for hallucinations.
This misunderstanding causes both believers and skeptics to overlook the possibility that a person who saw a UFO, bigfoot, etc. simply experienced a hallucination.
Here is an example from personal experience: I was depressed and found myself browsing classic UFO reports obsessively for several weeks. Then one afternoon I looked out my glass door and saw an apparent flying saucer slowly crossing the sky. It was too small to photograph, but I hurriedly dug out my camera in hopes that I could use the zoom lens to see it better. I went back to the door and the flying saucer was still slowly crossing the sky. I stooped over to pick up the camera, but suddenly the flying saucer was gone. I had an eerie feeling that the aliens were somehow aware of me and didn’t want to risk being photographed. A few days later I decided to make a report for MUFON in case somebody else had reported this same flying saucer - that way my report would lend credibility to their report. The investigator from MUFON interviewed me by phone, and I’m sure I sounded like a sane honest person who saw something real in the sky.
Recently I’ve learned more about hallucinations. So in retrospect I think my UFO sighting was probably a hallucination. (Incidentally my flying saucer looked very similar to a 1950s photograph that has always fascinated me - isn’t that a coincidence? )