What to Do When a House You Want Is Overpriced?

To some homeowners, their house becomes an extension of their egos. They overprice their home, reasoning that if the Adams home down the street sold for $180,000, then theirs must be worth at least $195,000, with all the neat decorating and wallpaper they’ve hung. How long it takes these homeowners to wake up to reality can depend on how much pressure there is to sell. If it’s a job transfer, it can be a couple of weeks. A good time gauge is the reason they’re selling. So, the first question you ask these sellers is why they would want to leave such a nice neighborhood and then listen carefully to their answer.
If this is a home you really want, there are a couple of things you can do.
First, you can keep an eye on the house, hoping the price will come down to what you think it’s worth. This, of course has its hazards—it might sell before that happens.
Second, you can make an offer for what you think the house is worth. If the sellers reject the offer or counter with a price you think is still high, you’re back to square one.
Joel and Penny had this problem when they wanted to buy a home near Penny’s mom, who needed help recovering from a hip replacement. They felt the home was overpriced for the neighborhood, based on comparable sales. The out-of-state owner priced the home based on what he wanted to get out of it and hadn’t gotten an appraisal. The seller rejected their first offer, so that put Joel and Penney back to the beginning; they didn’t know what to do next. They didn’t want to lose the house, but paying too much wasn’t an attractive option either. After talking over the situation with an appraiser, they decided to go back to the seller and offer the full price or appraisal, whichever was less.
With this approach, a neutral third party ends up setting the price. This allows the buyers to get the home at fair market value and gives the seller a way out without having to admit he may have priced the home too high.
Of course, the buyers have to know approximately what the home will appraise for so that they can get their financial ducks in a row before they make an offer. In Joel and Penny’s case, they had talked to an appraiser and knew about what the house would appraise for. To make a long story short, after a few phone calls back and forth, the seller accepted their offer, and the sale closed with both sides satisfied with the deal.
On the flip side, buyers can also be blinded to market values and lose the home they want, especially when friends or relatives say they can remember when that house sold for $50,000 and they wouldn’t pay a dime over $70,000 for it today. It’s best to ignore this kind of talk and go with the advice of real estate professionals who know the market.