In today’s competitive real estate market, where nearly half of homes receive multiple offers that push sale prices above asking, it's tempting to assume any appealing property will automatically attract a bidding war. However, this atmosphere demands a meticulous approach to assessing true value. Not every property deserves an aggressive bidding war, and operating under that assumption can lead to critical mistakes. This post explores how to spot homes that are overpriced while in a seller's market, sometimes intentional but often not by sellers and agents.
Especially in a robust market with low inventory, intentional overpricing can act as a calculated risk. Agents, myself included, might overstate a home's value to win listings—a common strategy even though it's rarely acknowledged. We often accept listings even if sellers want prices set far above market value.
Identifying when a new listing, otherwise perfect, is overpriced can be challenging. The scenarios I've described highlight intentional overpricing, either by the agent or the seller.
Conversely, accidental overpricing often arises from relying too heavily on atypical, higher sales in the area, which can distort the true market conditions. These outliers may lead to unrealistic pricing that doesn’t align with what buyers are actually prepared to pay, resulting in homes that remain on the market, unsold, despite high demand. Buyers and agents can also fall prey to viewing an atypical comp and mistakenly assuming its value is representative.
Overpricing a home can sometimes be strategically viable. Situations where this might make sense include an exceptional seller's market, a property that is unique or rare, or when there's high initial interest. Although it’s not always the optimal strategy, consider this: if a home is overpriced by $100,000 and sells for $50,000 less, the seller still nets an extra $50,000.
There are clear indicators that a home is overpriced, such as extended days on the market, lack of showings, and a dilapidated condition. However, some signs are less obvious:
Here are four subtle indications that a home might be overpriced, even in a seller-favorable market:
- Home Condition: A general lack of effort to present the property in its best light can be telling. If a property looks neglected or hasn’t been staged to depersonalize and declutter, it suggests that even the seller doubts its value or sale potential.
- Hard to Show: If a home is difficult to show—available only on weekends, requires appointments, or lacks a lockbox—this could point to an unmotivated seller, which is often associated with overpricing.
- Seller’s Next Move: Sellers who lack a clear plan for their next living situation may be merely testing the market, suggesting a less serious approach to selling which could lead to overpricing.
- Agent’s Experience: Inexperienced agents or those new to a specific market segment may set prices too high in an effort to make an impression or to compete despite not having a firm grasp of local market dynamics. Sometimes, sellers might choose a less experienced agent almost as a way to avoid the rigors of working with a more seasoned agent, which can lead to conflict in strategies.
Recognizing these indicators can help buyers and sellers navigate the complexities of a hot market and avoid the pitfalls of overpricing. If you think there are other factors to watch out for, feel free to add your insights in the comments below.
