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Back HomeOverpriced Homes and How to Identify Them
First-time homebuyers should be wary of overpriced homes. Lenders think twice about approving a mortgage if the appraisal is lower than a home’s sale price, forcing buyers to pull more of their resources to reach a deal.
Here are some indicators that a home is overpriced.
- The home has been in the market for several months
Overpriced homes tend to languish in the market for a good many months. Also called a “stale listing,” these homes leave buyers cold. Homes that are priced correctly usually get offers within weeks. - It’s priced higher than its neighboring properties
A quick survey of homes within the neighborhood will give you an idea if a piece of property is overpriced. Check listings within the community or ask around to make sure the home you’re eyeing isn’t worth less than its asking price. - It’s priced higher than comparables
A comparable property is one that’s similar in size, features, condition, and neighborhood to the property you’re interested in. Their list price should be roughly the same. - It’s the last home standing in a hot neighborhood
Take it as a red flag: a home that remains unsold even as buyers are making offers on, and purchasing, other properties in the same neighborhood. - It’s priced for custom amenities that don’t have wide appeal
Indoor basketball courts or special purpose rooms that are difficult to convert are custom amenities that can unnecessarily drive up the price of the home. Few buyers may find such novelties useful or worth paying for. The same goes for expensive upgrades. - Few show up during open houses
Once a home is on the market, there’s usually a lot of activity associated with it within the first few weeks. However, if open houses aren’t bringing in traffic and offers, then it’s a sign that the home is overpriced.
To learn more, check out our comprehensive Buyers’ Guide.You can also call 410.371.0581 and 202.483.6300 or email andy@LNF.com.
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