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Signs That A House Is Overpriced
It is as predictable as where the sun will rise from every morning. Home owners instinctly want to sell their homes at the highest price possible. And usually before learning what that price might be realistically, they will set a number higher than usual just to test out the market. They would feel like they have let themselves down if they had not at least tried their luck.
You job as an investor is to recognise where a buyer is at in a real estate listing. If a buyer is still in the stage where reality has yet to creep in, move on to other listings. Because time will eventually bring delusional owners back to a level of price that is more realistic. That is unless a maverick buyer somehow sees value where others cannot.
One of the big signs that a house is overpriced, is a lack of traffic or showings to the house. Surely if a house is in high demand, people will be visiting it to see whether it is worth parting with their hard earned money for. And surely if there is a good response to the listing, you would see that the house would be conducting many open house viewings for prospects to satisfy their curiosities. There are a number of ways to discover for yourself whether or not the house is getting a bad response due to overpricing.
Many houses have what is called an “open house viewing.” Typically these are held on the weekends. While you would not want to park outside the house, it may be possible to drive by; several times a day and check out how many cars are visiting. It can be very obvious what can be going on to a neighbour.
The neighbors are also a good source of information. While it is not advisable to go knocking on doors, you could spot a neighbor and simply ask if there has been a lot of response because you would rather go at a quiet time. Most neighbors would offer up that “any time is a good time, because I haven’t seen any cars,” or something to that effect. You would be surprised at how helpful neighbours are at offering information for potential buyers. Because firstly, they would want to be on the good side of a potential new neighbour. And secondly, nobody have ever asked what are their opinions of the neighbourhood before.
You should always research what homes in the area recently sold for. By doing this, you should be able to establish a range of sold properties. Then take note if the house you are looking at is quite a bit higher priced in comparison to similar houses.
Recent transaction prices are best indicators of how the market values properties in a particular area. Appraisers offer professional opinions and home owners offer their biased opportunism. But it only through real verified numbers where you can take a look at the real figures that the market is willing to deal at.
Now if the house has been on the market for a long time, there are two typical reasons for this. Although the house may look great on the outside, it is very unkempt on the inside. If you are a buyer, use this reason as a justification to negotiate for a lower price. if you are a seller, it is time you genuinely consider hiring a professional to stage your home.
Perception is reality. Home staging can do wonders on perceived value in the minds of buyers.
One other explanation, is that the owner has simply overpriced, asking what he wants, rather than what it is really worth. Anyone can be prone to making this mistake. Even you. And many home owners also choose to overprice just to see if they will be able to get away with it as discussed previously. You won’t be able to hook an inexperienced buyer until you lay a bait after all.
Take a look at all the houses in the surrounding area. How old are the houses in comparison? The overpriced house may be quite a bit older and therefore not as desirable to those like yourself who are seeking a new home. Arrange to view the house and look for certain tell tale signs. When walking the house, note if all the bathroom fixtures, such as taps and toilets…look old and worn. Take note of anything that has been updated. While the owner may have slapped on a fresh coat of paint, how do the carpets or hardwood flooring look?
While home owners should disclose everything about their houses, they rarely do. The disturbing thing is that they are not legally obligated to declare many items that most people view negatively about. This is reason enough for you to conduct your own inspections before making any commitments to a deal. Or if you do have to deal due to the lack of time, always include “get out” clauses in case you discover something alter that would not make your purchase worthwhile.
Owners who consider themselves to be handymen, will often do their own repairs. And because they are often not professionals, repairs are done just to solve problems on a temporary basis. If they already know that they would be selling the house soon, why spend thousands of dollars for repairs which they won’t reap the rewards from? Just like if the air-conditioner is not working particularly well and you already have plans to relocate within the year, why spend thousands of dollars to install a new one. Kicking the can down the road and let new owners deal with the problem will look like the common sensical thing to do.
Watch for shoddy repair jobs to cupboards, doors, windows, fixtures, and such. It is also a good idea to look at anything that seems out of place, like an empty room that has a carpet right in the center. They could be hiding defects underneath it. Or a sofa set that truly looks out of place in the corner of a room.
All in all, trust your gut. If you don’t feel that a house is worth a sum of money, walk away. It is better to let go of it this way than to forever live with the emotional burden of justifying to yourself that you did not overpay.