At the height of the pandemic, the real estate market saw rapidly rising home prices as low inventory and high demand sparked bidding wars and buyers willing to pay well over asking price in many situations.
Unfortunately, for many, they are now suffering from a bit of a hangover. As the market returns to some balance, those who paid more than they should have for a home may be finding themselves in a negative equity situation—where their mortgage is more than the current value of a home.
No matter what the market conditions of the day happen to be or how badly you want to buy a home, you should try as best possible to steer clear of buying a home that is priced too high. If you’re working with a skilled, reputable real estate agent, they should be able to guide you accordingly, but here are some telltale signs of an inflated price that you can spot yourself:
The home has been on the market for a while. All real estate is local and some markets move faster than others, but generally speaking, if you’ve seen a for-sale sign on a property for many months, that could be a sign that the seller is asking for a price that’s beyond market value. You could steer clear, or it could be an opportunity to negotiate down.
Surrounding homes are selling more quickly. If you’re not sure of the average days on market of the homes in the areas in which you’re looking, then take a look at the other homes that have sold in the area. Find out how quickly they sold—if it’s faster than the home you’re considering, it could be a sign that it’s priced beyond market value.
It’s been on and off the market. Have you noticed the home listed for sale then not listed for sale…then suddenly listed again? Has this happened multiple times? A home coming on and off the market could also be a sign that the sellers ask too much, get frustrated when there are no offers, take it off the market thinking that it’s a matter of timing, then put it back on the market when they believe there will be a better chance of getting the price they desire, such as peak spring season. Be wary if you see this pattern because it could be a sign that the price is too high.
If you’re really interested in a home and the price seems too high comparatively, there’s a chance that there could be a valid reason, such as luxury features within the home. Check with your real estate agent to make the ultimate determination whether or not a home is priced too high and represents a solid return on investment.