Making an Offer on an Overpriced Home
Overpriced Homes Don't Sell Well
As you search for a home to buy, you will come across properties that have been on the market for much longer than the normal "Days on Market" for the area. Buyers first thoughts is that there is something wrong with the home. The location is bad, there is a problem with the condition of the home or it shows very poorly.
Sometimes the only thing wrong with the home is that it is overpriced. Overpricing a home when selling is an almost sure fire way of making sure it doesn't sell well.
Overpricing a listing has many consequences.
The home does not come up in MLS searches because it is higher than the buyers upper limit. The MLS Search reports about homes for sale in a given range of price the buyer specified and overpriced homes simply are not shown. Buyers never hear about it.
Buyers who are looking in the price range of the overpriced home expect more for their money and are not really interested in the home. They have done their research, or their agent has, and they know what they can get at that price.
Being for sale significantly longer than the "Days on Market" in an area usually means there is a problem with the home and many buyers will simply avoid these homes because they are not confident that they can figure out what is wrong with the home.
As a result no one considers making an offer on overpriced homes
Why do Buyers Hesitate to Make Offers on Overpriced Homes?
They don't want to insult the seller. Or they don't want to go to the trouble of making an offer on an overpriced home and face a scornful refusal.
Sellers often don't know that their property has been overpriced. Either they are using an agent from out of area who is not knowledgeable in the area, or the market has gone down. If they are not using an Realtor® they might not have done a proper valuation before putting on the market. Buyers should not assume that the seller knows that his home is overpriced.
Most people will also assume that the seller has already refused low offers on the listing and is stubbornly sticking to the high price. This is not always the case and often an overpriced property attracts no offers at all!
Identifying Overpriced Listings That Have Lingered on the Market.
If you search MLS, one of the criteria is DOM, days on the market. It is possible to specify a longer than usual DOM along with a price that is HIGHER than what you are willing to pay. Of course your other criteria such as number of bedrooms and parking should be correct.
What Would Motivate a Seller to Accept a Lower Offer
If the home has been for sale for a long time, the seller might be eager to consider a lower offer. The seller might have a deadline such as a transfer, or they might have purchased another home.
The seller might be considering lowering their price in view of the lack of interest. If they overpriced to "test the waters" at a higher price, they will have realized that the higher price is not working. If they overpriced because of ignorance, then the evidence will be mounting for a price change. This is particularly true if a Realtor® is advising them.
There are several things you can do to make your offer more acceptable to a seller.
Making an offer with a large deposit is one way of giving the seller a clear message that you are serious and that you are solid financially and not just trying to get a bargain.
Another way of making a low offering on an overpriced home is to clearly show the sellers that you have done your homework and present valid comparables. Your real estate agent will have done this for you so it's a matter of convincing the seller that these comparables are valid.
If the reason the home is overpriced is because the market is going down, bring figures to support the claim. See Market watch from MLS
Another way of making your offer more attractive is to present a clean offer. That is one that has no conditions. It is possible to have a home inspected BEFORE placing an offer. You should also have your financing sorted out BEFORE making an offer.
Accepting any special requests from the seller such as short closing time is another way to make an offer more attractive.
It is not unusual for overpriced home to be sold for less than their actual value because they have gone stale. Once the selling price is known (MLS reports it to Realtors®) other potential buyers will complain that they were willing to pay MORE than what the home sold for.