The housing market is constantly changing so knowing whether you are overpaying for a house can be tricky. Your real estate agent can keep you informed on changes in the market, but there are also signs to look out for to determine if you are overpaying. You want the home you buy to keep its value through the years or even gain in value. Watch for the following signs to avoid overpaying for a house.
- The house has been on the market for a long time
- It’s a nice house in a not-so-nice neighborhood
- The comps are much lower than the house you’re looking at
- The appraisal came in too high
- There are lots of problems found after the inspection
If a house has been on the market for longer than the houses in the area, it’s likely overpriced. It could be that the owners are just asking too much, or it might have a serious problem that causes potential buyers to back out after the inspection.
A nice house in a not-so-nice neighborhood will quickly lose its value. Whereas an older home in a nice neighborhood has the potential to increase in value due to renovations. Look at the area where you’re buying a home. Does it have new businesses popping up? Are there new developments nearby? More and more people are wanting to live in walkable neighborhoods so that ups the value of homes.
The best way to know if you’re overpaying is to look at the similar houses in the same neighborhood. Check their sale history and what they are worth now. If a house of similar size and updates is considerably less, then you may be overpaying.
It can be difficult to get approved for a mortgage if the appraisal comes in lower than the asking price of the home. If this is the case, you’d most likely have to pay cash for the home. Consider finding a different home if the home price is higher than the appraisal value.
House problems can be fixed, but the costs add up quickly. When buying a house calculate how much it would cost to fix these problems. Can you afford it? Does it make the house overpriced?