How To Tell If A House Is Overpriced: 5 Signs To Look Out For
May 09, 2023 5-minute read
Author: Miranda Crace
One of the biggest challenges to shopping for a new home or even selling your home is assessing what a buyer should reasonably be asked to pay for it. Since there are so many factors that help determine the price of a home, it can be tough to figure out if a house is overpriced.
Let’s discuss some of the signs to know if a house is overpriced or not.
5 Signs That A House Is Overpriced
There are a couple of ways to assess if a house is overpriced or not. Here are a few signs to be aware of:
1. It Doesn’t Match The Price Of Similar Listings
If you’ve been house hunting for a while, you’ll start to notice the price range that nearby houses are in, which can give you a good idea of what houses are being listed for in your area. An easy way to figure out if a house might be overpriced is to check out other comparable listings in your local area.
For example, let’s say you find a single-family home that is 10 years old. It has four bedrooms, three and a half bathrooms and is 2,000 square feet. This home is currently on the real estate market with an asking price of $800,000. A few blocks away, you spot a different single-family home that is 12 years old, also has four bedrooms and three and a half bathrooms but is 2,200 square feet. You see that it’s listed for $200,000 less than the first house. Although there can be less obvious factors that can raise or lower a home’s value, this can be a good first step to realizing that the first home could be overpriced. If you end up finding more homes similar to the first home and see that they are also on the housing market for much less money, then this further confirms that the asking price is too high.
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2. It’s Been On The Market For A Long Time
Another way to figure out if a home is possibly overpriced is to find out how long it’s been on the market. If you’re working with a real estate agent, they can help you determine how long a property has been listed. You can also find this number by looking on various websites, such as Rocket HomesSM, where you would check out real estate listings. While the number provided might not always be 100% accurate, it can often give you a good idea of whether a home has been on the market longer than most.
3. The List Price Doesn’t Align With The State Of The Home
It’s easy to see a home in a listing and assume that it’s a well taken care of and perfect home. But pictures can sometimes show only the good parts of a home – especially if the home has been professionally staged to look good in photos. This is why it’s incredibly important to tour a home before ever putting in an offer or moving forward with buying a house.
For example, you might find a home that has everything you’re looking for but when you tour the property in person, you start to see some things that don’t align with the asking price. Maybe you’re noticing small signs of water damage, broken tile or the home’s layout is misleading compared to how it looks in the pictures online. Consult with your real estate agent or REALTOR® if you have concerns about a home and want to know how the cost was calculated given the current state of the home.
4. The Price Doesn’t Match Your Calculations
Anytime you’re looking at a home, you can always calculate on your own what the price of the home should be. This can be done by using an automated valuation model (AVM) tool which can help potential home buyers determine the property value of a home. An AVM will use existing data to calculate the estimated value of a property. AVM tools can be found through various real estate listing websites.
You can also do your own rough math by averaging several home prices from similar properties in your area. If the price of the home you’re interested in isn’t anywhere near that average price then you might be looking at an overpriced house.
5. The Home Hasn’t Received Much Attention
If you’re a potential buyer and are working with a real estate agent, they should be able to tell you if there’s been any recent activity with the property. If your real estate agent informs you that there hasn’t been much activity on the property (pending sales, offers, etc.), it could be a sign that the home is overpriced. If a home isn’t selling over a long period of time, one of the first things people are going to assess is the price of the home.
How Do I Bid On A House That Is Overpriced?
If you have any inkling that a home you love might be overpriced, you should start formulating a plan for how to bid on the home and maybe even win the bid. While this process can be tough, it’s important to be prepared and know what you’re going to discuss with the home seller.
You should always be able to show proof of why you believe your bid is a good one. Make sure you have done research on the property, have viable comps to reference and can prove that your bid is one the seller should accept.
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How Can I Avoid Overpricing My House When Selling It?
As a seller, it’s important to put the time and effort into finding a listing price that’s reasonable when selling your home. There are several ways you can avoid overpricing your home:
- Analyze nearby properties. By assessing nearby comparable properties, you can get a better idea of what other homes similar to yours are selling for in your area. This can hopefully help you find a price that will make sense for your home.
- Consult a real estate agent. A real estate agent is a professional when it comes to understanding the housing market. They can give you tips on how to make a profit while still selling your home for a reasonable price.
- Know the value of your home. Understanding your home’s value can give you a better idea of what it’s worth and what it could sell for. This is especially important if the home has some existing issues that could affect the pricing of the home.
The Bottom Line: Overpriced Houses Can Be Tough To Buy Or Sell
Whether you’re trying to buy a home or sell yours, it’s important to be aware of overpricing and how to avoid it for your specific financial situation. By analyzing the house, looking at nearby similar properties and assessing its activity on the real estate market, you can start to identify if a house is overpriced or not.
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