Ten Ways to Tell If Your Home is Overpriced
If you’re selling your home, you need to understand that pricing your home correctly from the beginning is absolutely critical. The most common reason a home doesn’t sell is that it is overpriced.
Overpricing a home can create damaging effects, period. The probability is that if you price your home too high, in the beginning, you will likely end up with less money in your pocket, which is obviously not the goal when selling a home.
When selling your home, it’s absolutely critical you do not overprice it. If you happen to make the mistake of overpricing your home, you must immediately identify this mistake and make a change immediately.
How does a seller know if their home is overpriced? There are actually many telltale signs to know if what you are asking does not meet market expectations. Below are the top 10 signs that your home is priced too high.
If you’re selling your home and have experienced any of the telltale signs below, make sure you adjust as soon as possible!
Your Home Is Priced Much Higher Than Your Neighbors
Generally speaking, in most neighborhoods, home values will be relatively consistent and close. One telltale sign to know that your home is overpriced is if your home is listed $100,000 higher than other homes for sale in your neighborhood.
While it’s not impossible that there can be homes with a $100,000 value difference, it is quite rare. One of the most common methods that real estate agents will use to determine a home’s value is by completing a comparative market analysis. A comparative market analysis, also known as a CMA, is best described as a detailed analysis of sold homes in the past 6 month time period in a given neighborhood.
If your home is priced much higher than your neighbors, it’s very possible your real estate agent didn’t complete a detailed analysis of value. If a CMA wasn’t completed, this will not only lead to your home being overpriced but also can create issues with bank appraisals.
You’ve Had Very Few Or No Showings.
Excitement is a widespread emotion that a seller experiences. Sellers are generally happy their home is listed for sale and being advertised all over the internet. Weeks pass by, and there have been a couple or, even worse, zero showings.
That excitement now turns to concern and frustration. If this sounds familiar, the likelihood that your home is overpriced is high. If your home has been listed for sale for a few weeks and you’ve had only a couple of showings, you need to adjust the price in the hopes of generating some activity and showings.
You Haven’t Received An Offer.
In most real estate markets, if a home is priced correctly, a homeowner should receive at least one offer within the first two to three weeks. If you haven’t received an offer after a couple of months, this is a great way to know your home is most likely overpriced.
If your local real estate market is currently in the midst of a seller’s market, you should expect an offer on your home within the first couple of days on the market if it’s priced correctly.
Certainly, there are types of properties that may take longer than a couple of days or months to receive an offer on, but it is fairly rare. This typically exists when selling a luxury home or waterfront property.
You Hired The Agent Who Recommended A Much Higher Price
In any given real estate market, there can be hundreds to thousands of real estate agents. When you are interviewing prospective Realtors to sell your home, you must know what questions you should ask during an interview.
One of the most important questions relates to the pricing. You must understand how the prospective real estate agent came up with your home’s listing price. If you interview, 3 real estate agents and one of the real estate agents suggests a price that is $30,000 higher than the others. You need to know how they came up with that number.
Many real estate agents will “buy a listing” by suggesting a list price much higher than the market value. If you made a mistake and hired the real estate agent who suggested a much higher listing price, your home is likely priced higher than it should be.
Neighbors Homes Are Selling & Yours Is Not
One of the most frustrating things for a seller is when the neighboring homes are selling, and theirs is not. If you’re selling your home and this is happening, this is a sign that your home is priced too high.
A common statement from homeowners who are selling their homes is, “My neighbors home just sold for $200,000, and mine is much nicer than theirs. Why isn’t my home selling?”
Many sellers fail to understand that there are so many things that can influence the sale of a home. If this sounds familiar, a couple of things to keep in mind when it comes to comparing your home to your neighbors include;
- Was your neighbor’s home a different style of residence? Ex; ranch vs. two-story colonial
- Was your neighbors home larger?
- Did your neighbors home have high-end upgrades and amenities? Ex; granite counters, building additions, etc…
- Is the location of your home inferior or superior to your neighbors? Ex; corner lots or private/wooded lot
- Were the mechanics of your neighbors home newer than yours? Ex; new roof, windows, furnace, etc…
Bottom line, if your homes are selling in your neighborhood and yours is not, it’s probably overpriced.
Open Houses Are DUDS
One decision that should be made by homeowners who are selling their home is whether or not they want open houses. Statistically speaking, less than 2% of homes actually sell as a direct result of an open house. Open houses provide potential buyers the opportunity to look at homes without feeling the high pressure that some real estate agents may place on them.
If you believe that open houses are necessary to sell your home, what does it mean when the open houses are DUDS? If your real estate agent markets the open house and not one person walks through the door during the 2-hour open house, then your price could be an issue.
Like most, buyers have busy schedules, but a buyer will take the time to visit open houses if they are interested in a home. A buyer will, however, not waste their time if they feel a home is overpriced.
Internet Traffic Is Very Low
The internet has changed real estate industry over the past 10-15 years. The majority of home buyers are beginning their home search online. When buyers are interested in a home they see online; they will reach out to either the listing agent or contact their own real estate agent to schedule a private viewing.
One way to know your home is overpriced is to have little to no internet traffic or property inquiries. An experienced real estate professional who has a strong understanding of how to market homes for sale online should be able to provide traffic statistics and property inquiries.
Showing Feedback Indicates Your Home Is Overpriced
One of the biggest benefits of hiring a top real estate agent is knowing the importance of receiving feedback on their listings. Feedback from other real estate agents and buyers who are viewing a property can be a huge help. If you’re not receiving feedback from showings, it may be time to think about firing your real estate agent.
Feedback is important because it allows a homeowner the chance to correct things a buyer may object to. For example, if a prospective buyer indicates the paint colors are too “bright,” it may be time to consider repainting the room.
If the feedback from showings is that a home is overpriced, this allows a seller to adjust the price.
You’ve Received Low Ball Offers.
Most overpriced homes will not receive any offers; however, it is possible. Homeowners who overprice their homes and still receive a couple of offers should feel somewhat fortunate.
It’s a good chance that if a home is overpriced, the offers received are “low ball” offers. If a home is overpriced and offers are much less than the listing price, is it really fair to consider them “low ball” offers?
If you’re selling your home and have received several offers that you would consider “low ball” offers, you may need to reconsider whether your price is appropriate.
Your Home Didn’t Sell & Expired.
Possibly the most obvious way to know a home is priced wrong occurs when it doesn’t sell and expires. If a home doesn’t sell and becomes an expired listing after 6 months, it’s not because there are not ready, willing, and able buyers in your local market.
Instead of blaming it on the lack of buyers or the local real estate market, it’s important a seller looks in the mirror and realizes that their home was overpriced. Every home has a price tag that is acceptable to home buyers. If a home’s listing price is relatively close to the number a buyer considers fair, it will sell and not expire, period.
The Importance Of Pricing In Real Estate
The number one reason a home sells is that the price was right! Determining the list price of a home is such a critical piece of the home selling “puzzle.”
If you put the correct price on a home, it will sell in a relatively quick time frame. If you choose to overprice your home, it will either not sell or take several months to sell. If you choose to overprice your home, remember that you will likely receive less money for your home than to price it from the beginning correctly!
About the Author: The above Real Estate information on 10 signs your home is priced too high was provided by Kyle Hiscock, a top Realtor covering national-level topics for The Rochester Real Estate Blog. If you are thinking about buying or selling a home in the Rochester area, give Kyle a call!
How do you know if a home is priced too high? ›
- The Price Per Square Foot Doesn't Factor in the Cost of Renovations. ...
- There's No Build-Out Potential. ...
- it Keeps Flipping From On The Market To Pending And Back. ...
- It's Got a Few Unsexy Replacements Coming Up. ...
- You Keep Coming Back to the Curb Appeal.
If a house is overpriced, and a buyer is willing to pay that price, these are big risks because the house still has to appraise. Overpriced houses typically appraise for less, and you'll be forced to either lower the price anyway, or put your house back up for sale after the buyer goes to find another house.How do you know if your house is priced right? ›
- The home is overpriced compared to neighboring houses. ...
- The price does not match the neighborhood. ...
- It has been on the market for a long time. ...
- The home has too little viewings. ...
- There are too many upgrades and home improvements. ...
- The home's overall condition.
There's no reliable formula here. Typically, a low-ball offer is at least 15% to 20% lower than the asking price: offering $240,000 on a home valued at $300,000, for example. But sometimes a seller may be asking too much. If you can back up your offer with market data, you're making a serious offer.What not to fix when selling a house? ›
Fixing cosmetic damage
Sure, peeling paint, a weathered back door and scuffed floors may make things look a little run-down, but if you are looking to save some cash on repairs and renovations, you'll rather want the money to be put to good use.
A home's value is affected by local real estate trends, the housing market, the home's condition, age, location and property size.What to do when the house you want is overpriced? ›
- Hire an Experienced Real Estate Agent. ...
- Find Out if the Home Is Really Overpriced. ...
- Present Evidence to Show That the Home Is Overpriced. ...
- Know Your Seller. ...
- Make Your Offer as Appealing as Possible. ...
- Be Ready to Negotiate Back and Forth. ...
- Be Ready to Walk Away.
The 28% rule
To determine how much you can afford using this rule, multiply your monthly gross income by 28%. For example, if you make $10,000 every month, multiply $10,000 by 0.28 to get $2,800. Using these figures, your monthly mortgage payment should be no more than $2,800.
Cons. No one can predict when inflation might ease, and prices might fall. If you buy during a time of rising inflation, you might spend more than if you had waited for the rate of inflation to slow, sending mortgage interest rates and housing prices down.What month do houses sell best? ›
Sellers can net thousands of dollars more if they sell during the peak months of May, June and July versus the two slowest months of the year, October and December, according to a 2022 report by ATTOM Data Solutions.
What day of the week are most home offers made? ›
Friday appears to be the day of the week most-often bringing an offer to contract, though Monday through Thursday are not that far behind.Who pays closing costs? ›
Closing costs are paid according to the terms of the purchase contract made between the buyer and seller. Usually the buyer pays for most of the closing costs, but there are instances when the seller may have to pay some fees at closing too.How do you convince a seller to accept an offer? ›
- Get pre-approved & provide proof with your offer. ...
- Offer more earnest money. ...
- Discover seller's motivation to help structure your offer. ...
- Shorten the due diligence period. ...
- Make the offer as "clean" as possible.
Pros of making a cash offer:
They can offer a faster closing period. Your credit score doesn't factor into the process. You don't need a home appraisal. You can save money over time (no interest payments)
Factors that make a home unsellable "are the ones that cannot be changed: location, low ceilings, difficult floor plan that cannot be easily modified, poor architecture," Robin Kencel of The Robin Kencel Group at Compass in Connecticut, who sells homes between $500,000 and $28 million, told Business Insider.What makes a house easier to sell? ›
One of the most effective ways to sell your home fast is to price it competitively. If you price it too high, you detract prospective buyers out price out potential bidders. In addition, it make take longer to settle the negotiation process if prospective buyers want your price to come down.How long should you keep a house before selling? ›
Before selling your home, there is a set amount of time you should stay in it to make a profit or break even on purchase costs. This amount of time varies by person and circumstance, but wisdom from the real estate world says an average minimum target is about five years.What brings house value down? ›
Closure of facilities – public services, employment, amenities; if any of these services close, it could impact the value of your house as they're often appealing to buyers. Low school ratings – buyers pay to live in areas with good schools because they want their children to have access to the best education.Will house prices go down in 2023? ›
Zoopla said it expects house price falls of up to 5% in 2023. Property consultancy company JLL has forecast house prices in the UK will drop by 6% in 2023. While housing expert and buying agent Henry Pryor says he expects house prices to slip slowly through the year ending 2023 down by around 10%.What makes house prices go down? ›
The main factors that cause a fall in house prices involve: Rising interest rates (making mortgage payments more expensive) Economic recession / high unemployment (reducing demand and causing home repossessions). Fall in bank lending and fall in availability of mortgages (making it difficult to buy).
Do estate agents over value? ›
Therefore, some (not all), but some estate agents will feed on a homeowner's appetite to get the highest possible price for their home by giving them an over-inflated suggested asking price to market their property at (i.e. 'overvaluing').What is it called when your house is worth more? ›
Often (but not always), property values rise over time. This is called appreciation, and it can be another way for you to build equity.How do you buy a house when everything is expensive? ›
- Make sure it makes sense to buy. ...
- Calculate your home budget from your rent. ...
- Don't fixate on one neighborhood. ...
- Look at your trade-offs. ...
- Explore first time homebuyer programs. ...
- Downsize your lifestyle while saving for a down payment. ...
- Maximize your credit score.
The house you can afford on a $70,000 income will likely be between $290,000 to $360,000. However, your home-buying budget depends on quite a few financial factors — not just your salary.How much do you have to make a year to afford a $500000 house? ›
Generally speaking, mortgage lenders say that you can afford to buy a house that's 2.5 to 3 times greater than your annual salary. So in order to buy a $500,000 house, you would need to make at least $167,000 to meet the 2.5x income requirement.Can I afford a 300k house on a 100k salary? ›
With a $100,000 salary, you have a shot at a great home buying budget — likely in the high-$300,000 to $400,000 range or above. But you'll need more than a good income to buy a house. You will also need a strong credit score, low debts, and a decent down payment.Do houses lose value during inflation? ›
House prices tend to rise as inflation increases. This isn't surprising: The price of most everything tends to rise when inflation is higher, and housing is no exception. The Federal Reserve Board will often try to slow inflation by increasing its benchmark interest rate.Who benefits from inflation? ›
Inflation benefits those with fixed-rate, low-interest mortgages and some stock investors. Individuals and families on a fixed income, holding variable interest rate debt are hurt the most by inflation.Do prices drop after inflation? ›
inflation will fall as quickly and dramatically as it rose. We've seen it happen before.” In other words, prices could drop all of a sudden. Blinder also adds that raising interest rates won't be the end-all solution to lowering inflation.Do empty houses sell better? ›
Studies have shown that empty homes in high-cost real estate markets like San Jose sell for under 1% less than staged houses. Since you probably won't make the money you spend on staging back, it's better to leave your home empty. However, staging makes a big difference in low-cost markets.
What is the most important room when selling a house? ›
The kitchen is by far the most important room in the house for a buyer. A well-apointed kitchen dramatically increases the value of your home. As you build your new home to meet your personal interests and needs for your kitchen, you should consider these items in your kitchen design: Modern appliances.Is it better to sell a house empty or with furniture? ›
If done nicely, a furnished house looks far better than an empty house. It can attract potential buyers and convince them to prefer your property over other houses for sale in the locality. The more aesthetically appealing the interior of the house, the faster will be the sales process.At what stage do most house sales fall through? ›
Most collapsed house sales happen before exchange. The reason for this is simple, once you've exchanged contracts there is the risk of losing large amounts of money if a sale falls through.Why do sellers wait to accept offers? ›
They Received A Better Offer
In today's market, chances are you aren't the only person looking at the home. The seller may receive a handful of offers at the same time. Sellers have just as much time in their day as you do, so they may prioritize the offers, responding only to those they want to counter or consider.
But do sellers always accept the highest offer? The short answer is no. While the offer price is certainly one of the main things the seller will look at, it's not the only thing that matters. Savvy sellers (and sellers with smart Realtors) know that they need to consider the entire offer, not just the price.Are closing costs tax deductible? ›
Tax-deductible closing costs can be taken in the year you pay them, over the life of your mortgage loan or when you sell your home.How long does it take to close on a house? ›
A good rule of thumb is to expect the sale process to take 12 weeks from when you find the right home. But it varies depending on a number of factors. It could be as quick as six weeks and it could take up to three months. Let's take a look as what's involved in buying a home and how long each stage should take.How many days before closing is the final walk through? ›
In most cases, the final walk-through is scheduled within 24 hours prior to the closing date. Your real estate agent can help you set a time with the seller's agent when you can be sure the property will be accessible and (hopefully) vacant.How do you win the highest and best offer? ›
- Offer More Money. ...
- Pay in Cash. ...
- Get Pre-Approved. ...
- Add an Escalation Clause. ...
- Minimize Contingencies. ...
- Be Flexible on the Closing Date. ...
- Write a Personal Letter. ...
- Work with an Experienced Realtor.
When you're submitting a low ball offer, you need to make sure it isn't too low because it could offend the seller, who may not even want to entertain any other offers you want to make.
How do you beat all-cash offers? ›
- Get approved for your mortgage. Getting mortgage pre-approval before you try to make an offer on a house is a must. ...
- Waive contingencies. ...
- Increase your earnest money deposit. ...
- Offer above asking price. ...
- Include an appraisal gap guarantee. ...
- Get personal. ...
- Consider a cash offer alternative.
The rule of thumb is usually between 5 and 10 percent of the home price. Bear in mind that you could lose the money if the deal falls through, so it's important not to put up so much that you'd be ruined if you lost the cash.How much lower can you offer on a house with cash? ›
A good reason why you may want to offer below 5% is when you're paying with cash (although companies who offer sellers cash for their home will typically offer 65% below market price).Do houses usually sell above asking price? ›
A lmost one in three homes are selling at on or above their asking prices in the capital, according to new research published today. Analysis of Land Registry sales data has revealed that 30 per cent of properties have either matched or exceeded their owners' expectations.What should be your price range for a house? ›
To calculate 'how much house can I afford,' a good rule of thumb is using the 28/36 rule, which states that you shouldn't spend more than 28% of your gross, or pre-tax, monthly income on home-related costs and no more than 36% on total debts, including your mortgage, credit cards and other loans, like auto and student ...How do you know if a house is undervalued? ›
This is where looking at a property's cap rate — its yearly income potential divided by its current market value — is crucial. If you find a home with a higher cap rate than similar properties in the area, you've found an undervalued property worth investing in.What to offer on 300k house? ›
Around 5% to 10% below the asking price is a good place to begin. Make your offer in writing as there's less chance for confusion and only offer more than the asking price if you know that someone else has already offered that much.Should I wait to sell if home prices are increasing? ›
Housing Market Conditions: If the housing market conditions continue to be impacted by high mortgage rates and elevated home prices, it might not be the best time to sell your home in 2023. You could end up getting a lower price for your home or struggle to find a buyer.