When looking for a property on the real estate market, there’s every chance you’ll come across overvalued properties. It takes a little expertise to know how best to spot and avoid them. However, when you’re buying a property for the first time, you may not have this knowledge. That’s why we’d like to help you on your quest by showing you six ways to tell if a property is overvalued. They will help you learn how to correctly analyze an ad and spot the signs of overpriced properties. After reading this article, you’ll know exactly how to avoid property traps. Here are the things you need to watch out for when looking for your new home.
1. Higher prices than in the rest of the district
When you’re looking for a property, the first thing to consider is its price in relation to other properties in the area. Of course, prices will be higher in more desirable neighborhoods. After all, we all want to live in upscale areas with excellent schools, healthcare and entertainment offerings. However, comfort and luxury come at a cost, so expect higher prices in these areas. Conversely, if the location isn’t ideal, a high price is likely to be unjustified. And even if the property is considerably larger than others in the neighborhood, its price may still not be worth it. We therefore recommend that you look closely at all the listings in the neighborhood and compare them. Take a look at past sales prices too. This will give you a better understanding of the prices that properties in this area should command.
2. The property has been displayed for a long time
Another way to tell if you’ve found the right property or if it’s overpriced is to look at when it was listed. Yes, properties can stay on the market for a long time for many reasons. However, one of the main ones is incorrect pricing. A fairly priced property should not be on the market for more than 60 days. In fact, such a property normally sells in a matter of weeks, if not days. So, if you find a property that’s, as you might say, past its sell-by date, don’t go near it. It will probably never sell because the price is potentially too high.
At the same time, don’t confuse luxury properties with high-priced ones. High-end properties tend to stay on the market longer because of their price. So look carefully at the type of property to be able to make a better judgment.
3. No visits or offers
If you’re looking for a property online, look at the number of times a property’s listing has been viewed before you make an offer. If it’s zero or very few, that’s a red flag. People’s lack of interest always speaks volumes, especially if the neighborhood or property is attractive. It’s an indication that, most likely, the price is wrong. So steer clear of properties that generate little interest.
Also, if you’re looking to distance yourself from a property located in another city or province, take a look at the offers on a property. If there are no offers, there’s probably something wrong; in most cases, it’s the price that’s the problem. Similarly, if there are offers, but they’re below the asking price, that’s also a red flag. This indicates that people know the value and won’t accept to pay more. In this case, you should do the same.
4. A disproportionate upgrade
When preparing a property for sale, staging is an essential step. Part of this involves improving the property to increase its value. However, some sellers fail to grasp the concept and go about it in the wrong way. For example, they make improvements without restraint and think it’s only fair to ask a higher price to compensate for the money they’ve put in. At this stage, you need to think about whether you really need all these upgrades. And you need to see if the price exceeds your budget and by how much. If you have to go into debt to pay for the property, it may not be worth it. After all, expenses will keep coming after you buy the property.
5. The property is not in very good condition
Sometimes sellers ask for a higher price because of sentimental attachment: it’s the property in which they grew up, where they raised their children, or in which they created many memories. However, this is not a good enough reason to ask for a higher price, nor is increasing the price to match the neighborhood. Not all properties have the same condition and value. Therefore, have the property inspected to find out if it’s overpriced.
During an inspection, the professional will check the general condition and safety of the property. You’ll find out if the foundations are sound, if the plumbing is in good condition or if there’s a risk of flooding. If the property passes inspection, you can make a competitive offer. If it has minor defects, you can decide whether to spend more to repair them or make a fair lower offer. Alternatively, you can drop the property and look for another in better condition and at a lower price.
6. Your real estate broker does not recommend it
One of the best decisions you can make when looking for the property of your dreams is to hire a real estate broker. Professionals in this field know how to distinguish a good deal from an overpriced property. They have years of experience working with all types of buyers and sellers and can answer all your questions. So, before you make an offer on a property and risk paying too much, talk to your broker. If he doesn’t recommend the property, he most likely has valid reasons that he can explain to you.
Things to remember
If you’re looking for your next property, it’s important to know how to determine if it’s overvalued. So remember the tips we mentioned above to search effectively. That way, you won’t waste your precious time and energy looking in the wrong place.