How Can You Tell if a Home is Overpriced?

Hello Hampton Roads,

Home prices may still be on the rise, but inventory is increasing even faster, and we're seeing more price-reduced listings on the MLS. So, what does this mean for you? It signals a market shift, prompting many buyers to ask, "How can you tell if a home is overpriced?" Whether you're a buyer or a seller, understanding this can be incredibly beneficial.

Setting the right price is crucial to attracting buyers and closing the deal quickly. Overpricing can cause your home to sit on the market for too long, while underpricing can mean missing out on potential profits. Striking the right balance is essential. Here are some detailed indicators and tips to help you determine if your home is priced realistically or if it needs adjustment.

Comparable Sales: The Neighborhood Benchmark

First take a look at the sales activity in your neighborhood and pay attention to active, pending and closed sales over the past 6 months giving more weight to closed sales.  When looking at comparable sales or "comps", make sure you are using the right ones and comparing "apples" to "apples."  Comps should be within the same neighborhood or nearby (within a 1/2 mile or 1 mile radius), similar in size, condition, and features. Adjustments must be made for any differences between your home and the comps. If your home is priced significantly higher than these comparable properties, it may be seen as overpriced and overpriced homes don't sell. 

Overpricing your home is like slapping a Ferrari price tag on a used Honda—no one’s buying it. Price it right from the start, and it’ll move.

Days on Market (DOM): The Ticking Clock

If you're a buyer then time is on your side and longer DOM is your friend but if you're a seller, time is not on your side and longer DOM works against your asking price. Find out what the median DOM is for your neighborhood so you have a benchmark in mind. If a home has been on the market for an extended period of time with no offers, that's a red flag. Typically, homes that are priced appropriately go under contract within a reasonable timeframe, often within the first 30 days. If your home has been on the market for several months with little to no interest, it may be time to rethink your pricing strategy.  

Why does DOM matter? Buyers often look at the DOM as an indicator of a property’s desirability. A home that has been on the market for a long time may be perceived as having issues, whether they are real or imagined. This perception can lead to a negative loop of fewer showings and lower offers. Therefore, it's crucial to get the pricing right from the start to avoid an unnecessarily long DOM.

Property History

Checking out a home's history will give you lots of useful information! If you find that a home has been listed multiple times andit  didn't sell, chances are good that it's overpriced. If you see multiple price reductions, you know 3 things:

1.  The seller is motivated.
2.  There is active price discovery going on.
3. The home is overpriced.

Condition of the Home: A Key Factor 

The condition of your home plays a major role in its value. If your property requires significant repairs or is dated, it may not justify a high asking price.  On the other hand, if your home is in excellent condition with modern amenities, you can reasonably ask for prices at the upper end of the market.

Your home is always being compared to others aka "the competition" and the competition is either helping to sell your home or your home is helping to sell competition.  Ensure that your home is well-maintained and presents well to maximize its value.

Market Conditions: Buyer’s Market vs. Seller’s Market

Understanding the current market conditions will help you understand further if a home is overpriced or not.  In a seller's market, where demand is high and inventory is low, prices tend to escalate higher with multiple bidders.  Conversely, in a buyer's market, where there are more homes for sale than buyers, homes are priced more competitively to stand out from the crowd.

Final Thoughts

In short, it's pretty easy to determine if a house is overpriced by simply reading the market. Appropriately priced homes in good condition tend to sell quickly at or near the asking price or even sometimes over if there is strong competition. Conversely, an overpriced home has a long history of sittingon the market with no offers and may be inferior in condition compared to similar homes for sale. 

If you are thinking of buying or selling in this market and would like a little guidance, you can schedule a free consultation with me here: https://calendly.com/liz-schuyler

Thanks for Reading,

_________________________

Thinking of  Selling? The market is shifting but you can still put your home in the best position to sell. Get Your Free Home Seller's Guide on Selling your home for TOP Dollar in Any Market!