Top 6 Signs You’re Overpaying for a House

If you are a homebuyer in the U.S. housing market seeming like a runaway freight train so many homebuyers are worried about overpaying for a house. Here, I will provide you with 6 signs you are overpaying for a home. I have some great tips on how not to overpay for a house.

The 6 Signs You’re Overpaying for a House

There are always markers, guideposts you can look at, which will tell you if you are overpaying for a house.

1. The Listing Price Is High Compared to Other Nearby Homes

The first guidepost to help you answer how do I know if I’m overpaying for a house is the home is listed a meaningful amount higher than other homes in the neighborhood. Homes in the same neighborhood are usually surprisingly similar. Some may be a little bigger than others, but generally are the same based on style, build year, overall size, and features. A sign you are overpaying for a house is when it is listed significantly higher than other nearby homes with no justifiable reason to support the price.

2. Online Estimates Are Lower than the List Price

Online valuation tools are not perfect, but they are getting better with each day. If online valuation tools are producing a value significantly lower than what the list price you may be overpaying for the home. Keep in mind online valuation tools still struggle to account for subjective items such as new kitchen cabinets, contemporary paint colors, or professional landscaping. These and other similar characteristics cannot be easily numerically measured and assigned a value.

3. The Home Has Been for Sale for a While

You might be asking am I overpaying for a house if it has been listed on the market for a long time. A high number of days on market compared to other homes is an indication you are paying too much for a home. Overpriced homes do not get showings and therefore do not get offers. If everyone else is saying, “no,” why are you saying, “yes?”. Be wary of a high number of days on market compared to other homes.

4. Other Homes at This Price Did Not Sell

A harder signal to detect is whether other similarly priced homes have failed to sell and been removed from the market. It is likely your real estate agent can easily get you this information. However, if you are not working with an agent it can be more difficult to find this information.

5. The Home Needs a Lot of Repairs

Often a home inspection occurs after you have made your offer. Do not be afraid to revisit the purchase price of the home based on the results of what was found during a home inspection. Just giving the seller a pass on inspection issues such as numerous major appliances past their expected life without amending the purchase price can cause you to overpay for a house.

6. The Home Has Received Multiple Offers

Don’t avoid a house just because there are multiple offers. What is important in a multiple offer situation is to know your maximum purchase price. Know that and do not go beyond it. Letting your emotions take control will likely lead to you overpaying for a house.

How to Avoid Overpaying a House

Homebuyers can avoid overpaying for a house by just being savvy shopper and using the tools available to them.

1. Work With a Real Estate Agent

Real estate agents have access to the MLS database in your area. This is the best source to get the most accurate and comprehensive data on home prices. A real estate can easily tell you if you are overpaying for a house.

2. Use an Appraisal Contingency

My clients often ask can you overpay on a house if you have an appraisal? The answer is it’s your choice. The appraisal works as a circuit breaker. If the home misses the mark during appraiser it gives you an opportunity to terminate the purchase agreement so long as the agreement contains an appraisal contingency. This is a great way to protect yourself and help you back out of the deal if the appraisal is short on value.

3. Evaluate the Neighborhood

If the home you’re buying is the most expensive in the neighborhood you may be overpaying for the house. However, some homes have to be the most expensive. Evaluate how much the home matches other homes in the neighborhood as well as how much higher it is than the next highest priced recently sold home.

4. Keep Your Emotions In Check

If you completely fall in love with a house your emotions are going to get away from you. Unless a home is absolutely perfect in every way be careful falling head over heels for the house. Instead, remain objective throughout the offer and counter offer stages.

5. Improve Your Home Purchase Terms

The terms of your offer can be worth a lot more to the seller than they are to you. Every seller is also trying to solve a problem. Offer amazing terms to help the seller such as buying the home as-is or offering post-closing possession and a closing date which works best for the seller. Many home sellers will forgo some money on the purchase price in exchange for terms which meet their needs.

Conclusion

It is easy to get caught up in the emotion and momentum of a home purchase and end up overpaying for a home. Knowing the signs you are overpaying for a house is important. For example, a listing price high above the pricing found amongst online valuation services can be a sign you are overpaying for the home.

There are methods homebuyers can use to avoid overpaying for a home, too. Homebuyers should look to their real estate agent to help them make the best offer without getting too carried away regarding the price. Don’t forget offering terms which fit the sellers’ needs is both an extremely effective and a too often overlooked way to avoid overpaying for a home.

If you are buying a home in Indiana and are worried about overpaying contact us. Quadwalls.com has a team of Indiana Realtors® ready to help you find and buy your new home. Complete the contact form below, and I will contact you.