3 Signs Of An Overpriced House That Potential Buyers Need To Know

If home is where the heart is, it’s easy to see why so many of us believe we should list our home at the highest price. It’s where we’ve shared family dinners and gatherings with friends. It’s where we’ve watched our kids take their first steps. And it’s where they got ready for their first day of school or prom.

But when the tables turn and you want to buy a new home, your priority will be to save money. That’s why you should learn how to spot an overpriced house.

Buying an overpriced house can be a major financial mistake. One of the perks of homeownership is building equity in your investment. If you purchase an overpriced home, you’ll have less equity in the home, which will make building equity harder.

Not sure if the homes you’re interested in are listed too high? Here are a few signs you’ll need to flag to help you avoid buying an overpriced house.

How To Know If A House Is Overpriced

Just because you’ve found your dream home doesn’t mean it’s worth the price the seller is asking. That’s why it’s important to spot the signs of an overpriced house before you make an offer on a home. Here are three telltale signs that you may be interested in a home that’s listed for more than it’s worth.

1. The Home Is Listed Significantly Higher Than A Neighboring Property

Houses in the same neighborhood with comparable floorplans will likely be within the same general price range, so pay attention to neighborhood trend reports and note any discrepancies you see. If the house you’re interested in costs $50,000 more than the house down the street, you’re likely looking at an overpriced home.

To prepare yourself to attend open houses and tour properties, have your buying agent complete a comparative market analysis (CMA). A CMA looks at homes sold within the past 6 months in a neighborhood to help you better understand your prospective neighborhood’s home price range. If the home you’re looking at is priced much higher than the average list price of nearby houses, it may be time to walk away.

2. A Neighboring Home Sold Much Faster

If nearby homes are selling faster than the home you’re interested in, it could be a sign that the seller is asking for too much.

Double-check those comparable homes and their listing prices. You’ll likely find homes in the local real estate market that are selling for less.

Though the house you’re eyeing may be nicer or larger, there will rarely be a significantly large price discrepancy between one home and another.

3. The Home Has Gotten No Offers

Your real estate agent should know whether any offers have been made on the home you’re considering and can help you determine why the home isn’t selling before you submit your offer.

There’s a good chance a home is overpriced if it’s been sitting on the market for months and the seller hasn’t received any offers.

If a seller gets no offers or nothing but low offers, it’s a compelling sign that the home seller is asking for far more than the housing market (and other home buyers) think the home is worth.

How To Bid On A House That’s Overpriced

If you’ve found the perfect home, but it’s overpriced, that’s not necessarily a signal to give up on it. Here are a few proven strategies to make bidding on overpriced properties and negotiating lower home prices easier.

1. Work With A Verified Agent

A buyer’s real estate agent or REALTOR^® is well equipped to spot overpriced homes on the market. A Rocket Homes℠ Verified Partner Agent can add value to your home buying experience with their expertise and personalized recommendations.

2. Gather The Evidence

Remember when we talked about your buying agent completing a comparative market analysis? Locate your CMA and other documentation to offer as proof of pricing. Home buyers and their agents can use this documentation to better negotiate with the seller and potentially get a lower price on the home.

3. Learn Why The Homeowner Is Selling

Knowing why a seller is selling their home may help a buyer get a lower price on a home they think is too expensive. If you know the seller needs to sell quickly, you can use that knowledge to your advantage. Sellers with hard deadlines are often more willing to negotiate. Talk to the seller to learn why and when they’re moving. They may be more willing to accept a lower offer if they need to relocate soon.

If they’re not in a rush to leave, they may not be as open to negotiating a lower asking price. Either way, it’s best to uncover these details as soon as you think you’re interested in a property.

4. Sharpen Your Negotiation Skills

One of the most effective ways to lower the final home price is by negotiating with the seller and seller’s agent. While your real estate agent will handle the communication with the seller and the seller’s agent, you should learn how to negotiate the best house price. If you’re successful, you may convince the seller to accept a lower bid, cover the cost of certain repairs or even cover some of your closing costs.

Is My House Overpriced? What Sellers Should Do

It’s common for sellers to try to get the best purchase price for their home, but they may need to adjust their expectations if they’re only getting lowball offers or no offers. If you’re selling your home, work with a listing agent. They can help you avoid overpricing your house and pivot when the house isn’t selling.

For example, if you think the issue may be defects in the home, you may take your home off the market and make repairs before relisting. In some cases, your agent may suggest generating more interest by hosting an open house, or they may recommend dropping the home sale price.

What If I Bought An Overpriced House?

Unfortunately, it’s not unusual for a buyer to overpay for a home. Some buyers may not realize they paid too much. And some buyers may suspect they paid too much because they purchased a home in a competitive seller's market.

Buyers who overpay for a house face many challenges, from paying off a high mortgage for several years to struggling to build equity because the home price exceeds the home’s value. They may also struggle to resell the home at the price they bought it or to make a profit.

To know whether you overpaid for a house, look at the property’s market value and compare it to other properties in the area. But the best way to avoid buyer’s remorse is to check comps before you make an offer and avoid overpaying in the first place.

The Bottom Line: Learn To Spot The Clues Of Overpriced Homes Before You Buy

The best way to tell if a home is overpriced is to work with a buyer’s agent who works in your desired neighborhood. If you’re worried about purchasing an overpriced house, a real estate professional should be able to spot one right away and will know which negotiation tactics produce the best results.

If you’re ready to begin the home search process in an overpriced housing market, connect with a real estate agent who can guide you through each step.