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PurchaseBlog posted On September 16, 2021
With surging home prices, high buyer demand, and low housing inventory, the market can become a feeding frenzy for eager buyers looking to lock in low mortgage rates. Sellers list their homes at higher prices and buyers make offers that are tens of thousands of dollars over asking price to compete. But even in a seller’s market, there comes a point where the price of a home simply outweighs its worth. Here are five ways to determine if a home is overpriced.
One of the best ways to determine if a home is fairly priced is by comparing it to the prices of other homes in the area that have sold recently. If it is significantly higher than the prices of the other homes, then it could be overpriced. For accurate comparisons, make sure that the homes share similar features and locations. For example, if the home you’re interested in buying is a one-story, look for a one-story comparison house. If it is a waterfront property, compare it to another waterfront property. Other features to look for include:
Keep in mind that the home price you’re comparing should be from a relatively recent sale – over the past couple months – for it to be most accurate.
Finding a home with the same square footage won’t always be the best price comparison. Some homes around the same size might need more updates than others. This can add thousands of dollars to its actual value. American Home Shield, a home warranty service, reports that one in five of its clients place a service request within their first 30 days of homeownership. Some homes that you are comparing might be fully updated while yours might need more renovations. To help you get a more accurate comparison price, you can use different websites to assess a home’s condition and potential renovation costs. You can also get better comparison price by looking at more than just one house in the neighborhood.
Acreage is an important factor to consider because it can affect your home’s build-out potential. “Many millennial home buyers can’t afford their dream home right now, so it’s critical to understand how to get closer to it in the future,” says Liz Young, CEO and founder of Realm. If you purchase a smaller, more affordable house now, you can save up for an expansion later – depending on your city’s regulations. But if the home you’re interested in purchasing is small and doesn’t have any expansion potential (due to lack of acreage or city regulations), then it might not be worth the steep price.
When a home is ‘pending,’ it is under contract but not yet closed. Pending sales can fall through for various reasons, such as insufficient buyer financing. When you see a certain home repeatedly falling through, it could be a bad sign about the home. The appraisal could be falling short of the asking price, the home inspection could be revealing several issues, or other issues with the home could’ve been revealed. Before making an offer, you might want to ask your real estate agent why the sales have been falling through. And don’t skip your home inspection.
Curb appeal is often stressed to people selling their home. It’s an easy way to boost your home’s value without making costly remodels or renovations. Though a new front door and freshly cut grass might look nice, it might not be worth thousands of extra dollars on a home’s sales price.
In certain situations, making a higher offer on a home is a good idea. It can help boost your chances of locking down the home you love. Still, it’s always good to assess the worth of a home before going all in on an offer. Once you determine that it’s worth the investment, you can also boost your offer’s chances by getting preapproved. To get started on your preapproval, click “Get Started” above.
Sources: PureWow
