Pricing a home properly is both an art and a science, which means there’s often some error that creeps in. Sellers have to avoid either extreme, making sure not to over price or under price. More often than not, though, they err on the side of the former. Still, there remains an element of science in pricing based on the use of standard pricing strategies and formulas. It is possible, then, for you as a buyer to have a pretty good idea of whether a seller is asking too much. So let’s take a closer look at how you can know a home is overpriced in Los Angeles.
Factors Leading to Overpricing
When a home is overpriced in Los Angeles, it can generally be attributed to one or more of the following factors:
Yes, a real estate agent is a licensed professional with experience, but she is also human. And that means mistakes will inevitably happen, usually as a result of overconfidence in her ability to sell a home. That’s why both sellers and buyers in Los Angeles need a top-notch agent who will avoid such mistakes. (To discover more about this, call 562-881-9811.)
Maybe the number-one reason why a home is overpriced in Los Angeles is that sellers often have unrealistic expectations concerning their home’s value. This is usually the result of an irrational emotional connection to the home that stands in the way of an objective assessment of the home’s market value.
TOO MANY IMPROVEMENTS
A home may also be overpriced in Los Angeles because the seller has sunk way too much money in expensive customizations and upgrades. Often, in an effort to recoup these expenses, the seller prices the home above what the market can bear.
NOT REALLY WANTING TO SELL
It often happens that a seller may list his home without any real desire or motivation to sell it. “These homeowners,” according to top real estate professionals, “may test the waters to see if they can get interest at their dream number. The message that they are sending . . . is that they would consider selling, but only for an absolute premium.”
NOTHING TO COMPARE IT TO
Occasionally, a home is unique, so there is nothing in the neighborhood to compare it to, and the standard comparative analysis becomes ineffective. In such a case, the seller is really just guessing with respect to price and usually over prices.
Ways to Identify Overpricing
Above are the factors involved in and reasons for over pricing. Now, let’s examine exactly how you can tell a home is overpriced in Los Angeles using some key indicators.
Every property has an ideal price and a buyer demographic of who will be willing to buy it at different price points. And typically there is sweet spot within that price range for the quickest sale at the best price.
The problem, though, is that not every seller is in a hurry to sell because they don’t have a mortgage (or for whatever reason). In such a case, a seller will likely price at the high end of the price range because she can wait it out till she gets the desired price. And that’s why you absolutely must have a good agent in your corner to help you determine the reasonable range and the sweet spot within that range.
TIME ON MARKET
Another way to determine whether a home is overpriced in Los Angeles is by looking at how long it has been on the market. Here’s how the real estate experts explain it: “While some homes may sit on the market due to other reasons, this is usually an indication of overpricing. Generally, fairly priced homes will sell within a couple of weeks or even just days.”
NUMBER OF VIEWINGS
You can also know whether a home is overpriced by considering the number of viewings. Typically, if a few people have shown interest in the home, then there is something wrong, usually a price tag that is too big. If the area is nice and surrounding homes are in good shape, the issue keeping viewings few is most likely the price.
AMOUNT OF IMPROVEMENTS
We mentioned this earlier, and it’s definitely something to keep an eye on where the price is concerned because not all improvements actually increase a home’s value. Typically and understandably, sellers want to get back the money they’ve invested in improvements. But do you as the buyer really want or need all those upgrades? If not, then the home is likely overpriced for you.
COMPARISON TO NEIGHBORING HOMES
Probably the best tool to determine whether a home is overpriced is the tried and true comparative analysis. This involves a comparison of the home under consideration, along with its price, against comparable homes in the neighborhood that have recently sold. If the home you’re interested in is similar to these homes – with respect to square footage, condition, features, and so on – but is priced higher, then it just may be overpriced.
The Necessity of a Local Agent
There are, then, a number of ways you can know a home is overpriced in Los Angeles. But local markets have their own peculiarities and pricing constraints, so a home that seems to be overpriced (or even underpriced) in Los Angeles may not actually be. That’s why it’s so critical to have a qualified local agent to provide some pricing guidance.