How can you tell if a home is overpriced?

Buying a home involves a large financial commitment; in fact, for the vast majority of the population, it’s the largest purchase they will ever make. Because of this, you want to make sure you are paying a fair price. A way to ensure you do that is to be able to spot signs that a house is overpriced.

Days on market

If a home sits on the market for much longer than the average of other homes, it may be overpriced. For example, if the average days on market for homes in the same price range is 60 days, and this house is still on the market after for months, it’s a good sign the house might be overpriced. This is likely to be true especially if the house seems to be in good condition and has no other issues that would prevent it from selling. If a house is getting showings but no offers or no showings at all, those are further signs the house is overpriced.

Neighborhood prices

Of course, most neighborhoods have varied housing stock, and you can’t always make an apples-to-apples comparison, but a home that is priced considerably higher than the other homes in the area, especially ones that are of similar sizes and have similar features, may be overpriced.

Comparables

When Realtors recommend a sale price, they use “comparables” — houses of a similar size, with similar features in a similar neighborhood. If a house is priced significantly higher than what a Realtor can find for sale that’s comparable, it’s likely the home is priced too high.

Low offers

If buyers have made offers on a home but those offers are considerably below asking price, it’s a good indication the home is overpriced.

Price higher than assessed value

Though the tax valuation of a home often has little relation to market price, a house priced considerably higher than its tax assessment could be overpriced. This is especially true if nothing has been done to improve the home since its last assessment and if the assessments of other homes in the neighborhood have not gone up.

Pricey options

If a house is priced to try to recoup the cost of pricey options such as a designer kitchen or pimped-out basement, it might be overpriced. Just because such options are in a home, it doesn’t mean it’s worth more money. It depends on the market and the neighborhood. For instance, a high-end kitchen in a starter home is out of place and won’t command a much higher price.

Realtor opinion

If most Realtors think the house is overpriced, then it probably is. Any good Realtor is going to advise his or clients to shy away from a house he thinks is priced too high.

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