How to Identify Over-Priced Homes
Regardless of what the real estate market is like, competitively priced homes will simply stimulate more attention and inevitably sell faster than homes that are not appropriately priced. Many times homes that are competitively priced are garnering multiple offers, and often leave more money on the table compared to what the listing price called for.
However, many homes are simply overpriced, with sellers hoping to rake in as much money as they can on the sale of their home. Before you jump in on a home you like, it’s imperative to first evaluate whether the home is priced competitively, or if it’s significantly overpriced.
Here are some signs that a home is priced well above its actual value.
The Home is Priced Well Over Comparable Neighboring Homes
It’s absolutely imperative to look at what comparable homes in the neighborhood are priced. Not only should you look at the current listings, but also recently sold properties.
There can often be a discrepancy between the listing price and the final selling price, which is why looking at recent sold homes will give you a more accurate idea of whether or not a particular home is listed at a fair price. For example, if the home is a luxury mansion but is adjacent to mostly modest homes, it doesn’t mean the value of the home is significantly more; instead, the area it’s in can actually bring the value of the home down.
The Home Has Been on the Market for a Long Time
There are tons of homes that are sold within weeks or even days after being listed. These are typically homes that are priced according to what their neighborhood and surrounding homes call for. When properties sit on the market for a weeks and weeks, it usually means they are over-priced.
Alternatively, a slew of incoming bids and offers indicates that it is a fairly priced home. If there are no showings booked and no offers on the table, it’s highly possible that the home is over-priced.
If the interest and flow of traffic of other properties in the area is healthy, it’s quite possible that the home you’re looking at needs to undergo a price adjustment. While it’s easy to assume that eager buyers are indicative of a low price, professional real estate agents say that competitive bids more reliably reflect a reasonably priced home.
The Price is Based on Home Improvements and Unique Amenities
Many home owners who have drastically improved their homes with renovations will be tempted to boost the listing price of the home in an effort to recoup the costs of these improvements. Home updates like new kitchens, remodeled bathrooms, add-on decks, and new landscaping cost money and attribute to a higher property value. Not only can these improvements boost the time it takes to sell the home, they’ll also boost the price.
Although many sellers seek to increase the listing price to cover the expenses of these improvements, doing so can have consequences over the long haul. Many of these renovations might get the home off the market quicker, but they don’t necessarily warrant a higher listing price. It’s important to be aware of any improvements that the seller has paid for, and determine if they actually add some value to the home. This will identify if the price of the house is an accurate reflection of these repairs or not.
The Home’s Location Doesn’t Support the Listing Price
When it comes to real estate, location means everything. The same house in a well-to-do neighborhood versus an undesirable one will have very different values. A number of factors involving location will determine the worth of the home. For instance, the following features will deem a location less desirable:
• Homes are situated on busy streets
• Schools in the neighborhood are poorly rated
• It’s a low income area
• There are limited amenities nearby
On the other hand, locations with these attributes make them more desirable:
• Homes are located away from busy intersections
• Schools in the area are highly regarded
• The average family income is fairly high
• There are a number of amenities within walking distance
• Public transit and access to major roadways are close by
The more desirable the neighborhood, the more valuable properties tend to be. When it comes to real estate it’s all about location.
In general, the knee-jerk reaction for many homeowners is to automatically price homes high. They may assume that buyers will bid low; therefore, overpricing will help ensure that they get a fair price at the end of the day.
Unfortunately, overpriced homes do little to attract buyers that would otherwise have been potential candidates. Anyone who is selling their home would be well advised to price the home at a competitive price in order to generate the most interest. This is where the help of a real estate agent becomes extremely valuable; they’ve got the skills, experience and tools necessary to recognize a home that is over-priced.
