You have probably found a home you feel is perfect for you and has all the necessary amenities and features you ever dreamt of but the only barrier between you and the home is the ‘exorbitant’ asking price which is beyond your budget.
What is the next step? Should you just give up on the home even though it is everything you want in a home? Wait, that may not be an option yet. Buying an overpriced home is not easy but it is not impossible either.
Homeowners demand high price for their homes for various reasons. It may be because they have done comparative analysis on similar homes in the location or they just simply rate their homes and want to cash in on it. No matter the reason(s) a seller has for overpricing their home, you can make an attempt to purchase it if you are strategic about it.
You only need to learn the right tips and approach that will increase your chances for success in the process.
The section below discusses the strategies you can employ to make an offer on an overpriced home.
[RELATED: Top Frequently Asked Questions from Home Buyers]
Hire a Qualified and Experienced Buyers’ Agent
When hunting for a home, there is high possibility that you will encounter one that is overpriced since not all homes listed for sale are priced aright. One of the ways to be prepared for this is to be ready to negotiate well to increase the odds of getting your offer accepted. This is why hiring an experienced buyers’ agent to represent your interests in the home-buying process is very important.
An experienced realtor will most likely have negotiation skills developed and honed through their years of practising with high success rates in the past. One of the questions you should ask potential buyers’ agents during interviews is their experience in negotiating high asking prices.
The agent will negotiate the overpriced home on your behalf since it is part of their job to ensure you get a good price.
Gather Details of Recent Comparable Sales in the Same Location
Before concluding that a home is overpriced and deciding to submit a low offer, work with your buyers’ agent to find out if that is really the case. The best way to determine this is to conduct Comparative Market Analysis (CMA) that includes detailed information of comparable sales in the same location. This means determining the fair market value of the ‘overpriced’ property by comparing it with similar homes in the area that have been sold recently. If the result shows that the home is priced higher than others, it means it is overpriced.
Another thing you can do to determine if the home is overpriced is to check the average days it has stayed on the market based on what is obtainable in the area. If the home has been listed for like 70 days and the average days on the market in the locality is 40 days, it has probably stayed that long because it is overpriced and no buyer is willing to pay that much for it.
The seller’s opinion is not the determinant of the worth of a property. The owner may value their home over and above the true value of the home. Hence, you need to do your due diligence to find out the accurate worth of the property.
Provide Supporting Documents
Another way to ensure your low purchase offer for an overpriced home is accepted is to provide supporting documents to justify that the home is actually overpriced.
This is where the results of your Comparative Market Analysis (CMA) comes in handy. Do not go to the negotiation table without this document which should include the statistics on various recent comparable sales in the same area to serve as a proof that the price of the house is over market value.
Your Offer has to Stand Out
No matter how overpriced a home seems, you can get the attention of the seller through various means other than the offer price itself. Make all the components of your purchase offer very attractive and irresistible. Some of the things you can include are:
- A weighty Earnest Money Deposit (EMD): Including a strong EMD in your offer will make it more attractive.
- A mortgage pre-approval letter: If the seller sees that you have a mortgage pre-approval, they might be assured that you are well-prepared and qualified to buy their home.
- Flexible contract closing dates: Structure your contract dates in a way that will make them appealing to the seller.
- Limited number of contingencies: Having too many contingencies in your purchase offer can be a turn-off for a seller. If you include fewer contingencies, you might encourage the seller to consider your offer.
[READ ALSO: Top 10 Reasons why a Real Estate Closing is Delayed]
Know the Motivation Level of the Seller
Find out what motivates the seller to overprice their home and the level of their motivation. Some sellers might just be testing the waters with the price, not that they are really ready to sell. Depending on what their motivation is, some sellers might be interested in reducing their asking price when they discover that overpricing the home is a not a good strategy. This can also be the case if the seller notices that no buyer is interested in the home.
To know what the motivation of a seller is, let your buyers’ agent ask them relevant questions. The seller may want to sell the home off because they need to meet a deadline, because they have another home or just got transferred for job. Such a seller might be willing to lower their asking price.
Understand there could be Back-and-Forth
As you already know that negotiating an overpriced home is not easy, understand that accepting your offer immediately may not be possible. You have to be prepared for different rounds of negotiations as there will most likely be counter-offers.
So, be patient if you really want the property and think the seller is someone you like to work with. Who knows, you may just strike a favourable agreement at the end of the back-and-forth.
Be Prepared for any Eventuality
It is important you put in mind that some home owners are bent on selling their homes for the price they have set irrespective of how you try to convince them to do otherwise. Having this in mind will help you not to be disappointed if your offer is not accepted.
Be ready to move on if things do not work out the way you wanted. More so, if you are buying to resell, understand that the probability that an overpriced home will bring positive cash flow and good cash on cash return is very slim.
If you are making an offer in a seller’s market, remember the sellers are likely to take advantage of the high demand for homes by increasing their asking prices. In that case, it may not be wise to keep wasting time making an offer on an overpriced home as you might end up losing another home that is within your budget.
It may not be easy to buy an overpriced home but it is not impossible. If there is a home you love to buy but its price is more than your budget, try the tips above and you might just increase your chances of winning the heart of the seller.