Identify Overpriced Homes
Ask yourself a question: how motivated would you be to view a home if you knew the sales price was significantly inflated? And, as a follow-up question: Would YOU be willing to PAY that high price tag?
There is one common item that will make most people feel sour about their home experience; a price that is too high for their area.
Listed below are clues and tactics you can use to identify overpriced homes when you are searching for your next house.
Very Little Interest in the Property’s Online for Sale post
In the modern era that involves social media, websites, and other marketing to get a home noticed, it can be a matter of a few clicks to find out what kind of interest a home is generating online.
If the agent that listed the home has a solid marketing plan, the home should be generating interest from not only curious neighbors but truly interested buyers as well.
You can gauge the interest in a home by seeing how many people have liked the online post as well as the number of posts that involve questions. If nobody is asking about the home’s availability or the amenities, it could be a bad sign that people feel the price is just too much.
You can do a quick Google search, or Yahoo search, and find several marketing websites that will give you the number of online visitors to a particular page. If you live in a town with 250,000+ people, and only 3 or 4 people have visited the home’s for sale page in the last few days, then it sounds like the price is simply too high.
Few, if any, Offers to Buy the Home
If a home is in a decent area and priced accordingly, the home should experience several showings. After a few showings, as long as the home does not appear to have any glaring damage, there should be at least one or two offers to purchase.
In fact, with the current climate, if a home has not received any offers within the first 2 weeks of being listed, then that is a sure sign that the price is inflated for that particular market.
Getting your hands on the number of purchase offers made will be a little tougher to find. You will need to contact the real estate agent that has listed the home to find out the number of offers.
If you are working with your own buyer’s agent, you can request that your agent track down this information. Request the offer price from each interested party as well as how long ago the offer was made. This is valuable information that can help you formulate the right price for your proposal.
All of the Feedback from Potential Buyers Sounds the Same
When a person is trying to sell their home, they have no idea what aspect of the place will appeal to the right buyer. It could be the size of the bedrooms, the location of the home or the layout of the kitchen, or one of 100+ other details.
When prospects come to the home and leave feedback, either with the agent or online, the feedback should be varied. One person will like the yard but was not happy with the amount of storage in the kitchen. Another may love the kitchen and laundry area but wanted larger bedrooms or even more bedrooms.
However, if you see multiple reviews or learn that multiple people said almost the same thing, then you know the price is the problem. Things to look for would be
- “Too high for the area”
- “Too expensive for this school zone”
- “I can purchase a bigger home for less in similar areas”
Notice that all these reviews come back to the price as the glaring problem. If nobody is talking about any feature of the home, or the quality of construction, or size of the yard, or anything else that is unique to the home, you have located an overpriced home.
One Year or Longer on the Market
If a home has been up for sale for 12 months, or longer, then either the home has some unbelievable problem. . . . . . . or the price is too expensive.
In 12 months, almost every agent will have looked at the online listing. Not to mention that there will be new agents coming to the market, trying to find that first transaction and all the other kinds of searches that will take place in one year.
Some people might want to blame the agent and claim that the listing agent did not do everything possible to get the home sold by actively marketing the property. It may seem that the agent is not up to date with the trends in the area and does not have the right connections to get the home sold.
However, if nobody has made an offer for 12 whole months, between people driving by, accidental discoveries on random house searches by potential home buyers, and active searches by experienced real estate agents, then it is safe to say that the home is just too expensive.
Lack of Showings
To sell a home, potential buyers will need to visit the home, open the closets, inspect the yard and look over the place. This has been happening for years, even with the advances in technology.
Although it is possible to sell a home with a virtual walk-through, the majority of homes are still sold after a potential buyer walks through the place and sees everything in person. It is difficult to get a feel for a home’s layout from a video.
If the home is not getting appointments for showings, then nobody is looking at the home. If nobody is looking, it is safe to assume nobody is interested in the place.
Your buyer’s agent can find out how many times the home has been shown over the past week or month by simply contacting the listing agent for the property.
The list of offers on the home is significantly lower than the asking price
This information will once again need to be requested from the listing agent for the property. If the listing agent reveals all of the existing offers that have been made on the home, it is pretty simple to see what the current market thinks of the home’s asking price.
For example, suppose a home has been on the market for 45 days and the place is listed at $355,000. The listing agent provides you with a list of the offers made on the home and the list looks like this
Date Offer Made
Amount of Offer
3 days after the initial listing
1 week after listing
2 weeks after listing
4 weeks after listing
5 weeks after listing
6 weeks after listing
As you can see, all of the offers are well below the asking price. This is in part due to the buyer’s real estate agents doing their homework on behalf of their clients.
An experienced real estate agent will help their buyers by putting together a comparable sale report before placing an offer on a home. This report will list several homes in the nearby area that have sold. The homes will be similar in square footage, layout, and other basic amenities. This information will give the buyers a solid understanding of the price in that particular market at that particular point in time.
It will also show the buyer how this particular market values extra features like a swimming pool or a basement or an oversized garage. Although these items do not increase the space in the home, they are features that can add some value to a property.
The comparative market analysis (CMA) from a local real estate agent is one of the key indicators that a seller has listed their home at an inflated price.
The current owner is trying to recover money for expensive tastes
Ask any decent real estate agent the following question “what are the biggest factors that determine a home’s value?” and you will hear the same thing over and over; location and usable square footage.
This means that a home 2,000 square foot home in the same neighborhood as a 1,500 square foot home will sell for much more because it has more usable space.
There are too many potential home sellers that feel their particular home will command a much higher selling price because of their expensive tastes in terms of home materials. However, this is not always the case.
If a homeowner buys the most expensive brand of heating & air conditioning unit and spends extra on an extended warranty, it does not increase the value of the home.
If the homeowner chooses to remodel the kitchen and use expensive stone for the countertops and a high-end paint along with luxurious light fixtures, it will likely be a lovely kitchen when the work is done. But it will only add a marginal amount to the value of the home.
There is nothing wrong with spending extra money on any item of the home if the owner plans to live there another 20 or 30 years. But if the idea is to add value to sell the place for a profit, expensive items can hurt the seller in the long run when they find that other buyers do not value the same amenities in the same way.
The price is noticeably higher than similar homes
This point, along with the next point, was left for last because they are both really simple to understand.
Prices for similar homes are usually grouped in an acceptable range. For example, if one home measures 1,400 square feet and is priced at $250,000 then you would expect a neighboring home that measures 1,500 to be priced at around $267,900. Both of these homes are selling for $178.58 per square foot and have similar features.
But if there is a home with 1,550 square feet listed for $350,000, that would cause a bit of concern and questions from an average buyer.
It is not that easy to determine a home’s square footage from the road. But most real estate websites will list the square footage for the home, and you are always welcome to ask your agent for the numbers as well.
Like we mentioned above, the four biggest factors in coming up with a home’s asking price are the location, features, lot size and usable square footage of the home. Two homes sitting next to one another that is similar in style, layout, materials, and size should have a very similar price point. Any home that is priced way above the other homes is simply too high for the market.
Cheaper houses in the neighborhood are selling
This is likely the most important piece of information that you can have when trying to determine if a home is priced too high or not.
Look at all the homes that have sold in the neighborhood and the nearby areas. Using the information above, determine which homes are most similar to the prospect you are looking at. Take into account differences in square footage as well as differences in the size of the yard or lot. If multiple similar homes have sold at a much lower price, then the home you are considering is too expensive.
Summing Up Identifying an Overpriced Home
All of the previous points lead to one strong conclusion: every home market has a ceiling for the price of a home. The market will always dictate how little or how expensive a home can be.
The seller may have legitimate issues with pricing the home the way they did. Perhaps their mortgage balance is still high, and they wish to get a certain amount of profit to use towards the purchase of their next home.
Or the seller is simply trying to recover their investment into the home over the years of their ownership.
Unfortunately, the market does not pay attention to these reasons from the seller. You are better off buying a home in line with the market to avoid overpaying for your next home.
About the author: This article on “How To Identify Overpriced Homes” was written by Luke Skar of MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of their social media profiles as well as generating new leads from his website.
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