Albert Einstein is revered as one of the most intelligent men in history, but one of the most brilliant things he ever said was very straightforward.
And what he said had to do with the subject of experience.
Einstein said that information alone could not be considered or mistaken for knowledge. And that experience was mandatory for one to gain understanding truly. And that a union of experience and knowledge was the only way to gain wisdom.
In other words, Einstein was saying, "buyer, beware!"
And "buyer, beware" is excellent advice that should be offered to anyone buying a new house soon.
New home buyers don't have the experience or understanding of the volatile nature of the real estate market to understand that they may be overpaying for a house.
Mistakes are a necessary part of life. The only way to learn anything useful in life is to learn from mistakes, especially self-inflicted mistakes.
But for first-time home buyers, mistakes and inexperience can be costly.
New homebuyers are now overpaying for a house in record numbers.
Over 36% of the houses sold in February 2021 were sold at prices appreciably above relative market value.
This overpaying for a house statistic is a 15-year record.
Over a third of American homebuyers are overpaying for a house.
Homeowners who rent are paying the most. And first-time homebuyers are the ones more likely to overpay for a house than experienced homebuyers.
The average new homebuyer paid at least $2,900 more than they had to when buying a new house.
Understanding what contributes to overpaying is the first step toward protecting your investment. The pressure to secure a home quickly, emotional attachment to a property, and lack of market knowledge all play significant roles. Many buyers also fail to account for hidden costs, future maintenance needs, and neighborhood trends that directly impact long-term value.
As of October 2021, the typical price of a new house was at least $451,000 on average. And the average down payment paid on a new house in mid-2021 was at least $28,000.
While the down payment for a house is a signature calculation relative to the personal finances of a mortgage applicant, $451,000, or $28,000, is a lot of money for anyone to pay.
And yet, over 36% of mortgage applicants are now overpaying for a house.
So, what is going on? What unlearned home buying mistakes are new homebuyers making causing them to overpay for a house in large numbers?
We will examine the issue, show you what mistakes to learn from when overpaying for a house, and avoid doing so.
Let's find out how to get the best deal instead of getting ripped off due to lack of experience.
Related: First Home Buying Guide: Tips And Tricks
There is no general or golden rule for how long it takes to sell a house. However, depending on the local real estate market, the average house for sale was sold within six weeks.
Still, you should pay attention to how long a house has been sitting on the real estate market. The longer a house has been sitting on the real estate market, the more likely it is overpriced.
Have all the other houses for sale nearby already been sold? If one or two houses are left unsold in a neighborhood where many others have already been sold, then it's a dead giveaway that the lingering unsold houses are overpriced.
If a house for sale has been on the market for months or years, the seller may be more amenable to negotiations that benefit the buyer more. Whatever you do, don't just pay the asking price, aggressively negotiate.
Track listing history to strengthen your negotiating position. Real estate platforms like Zillow and Realtor.com show how many days a property has been listed. If you notice price drops over time, that signals seller desperation. You can use this data to make a lower offer and justify it with market evidence. Properties sitting for 90+ days typically have underlying issues, whether it's price, condition, or location problems.
The word "value" is a relative term that has a different meaning to different people, especially homebuyers.
One way to measure if you are overpaying for a house is to compare the house's value in question to similar homes currently on the local market.
A great way to find out if a house is overpriced is to compare its current price against the historical prices of places nearby.
If the house's listing price in question is significantly higher than the historical sale prices of nearby properties, then it's likely you are about to overpay for a home.
Inquire clarification from the seller to justify the price of the house against local historical sale prices.
Use comparative market analysis (CMA) to establish fair pricing. Your real estate agent can pull a CMA that shows recent sales of similar homes within a half-mile radius. Look for properties with matching square footage, bedroom count, and age. If comparable homes sold for $400,000 but your target property is listed at $450,000, you've got solid proof the asking price is inflated.
Many buyers make first-time homebuyer mistakes by skipping this comparison step and relying solely on the seller's asking price. Understanding common home buyer errors helps you avoid costly missteps during the buying process.
Calculate your true affordability, not just what lenders approve. Just because a lender approves you for a $500,000 mortgage doesn't mean you should spend that much. Run the numbers yourself. Factor in property taxes, insurance, maintenance, utilities, and HOA fees. A good rule is figuring out what percentage of income should go to my mortgage before you even start house hunting.
Build a realistic monthly housing budget that includes everything:
Leave room for life beyond your house. Overextending on a home payment cuts into retirement savings, emergency funds, and quality of life. The best time to buy a house is when your finances can comfortably support it, not when market pressure forces you into overpaying.
Contrary to popular belief, a home inspection of a house for sale is not legally required, so the buyer must request it.
When you buy a home at a public auction, you may not even be allowed to view or inspect the property up close before a sale.
You can request a house showing by appointment or visit via a community open house.
However, if you're restricted from seeing a house up close or restricted to viewing only certain areas during a showing, it's a good sign that the property is overpriced.
One inescapable bane of homeownership is the need to pay for occasional repairs and renovations as needed. Things will wear down and break down in a house. And cumulative damage to a home's exterior will occur over time.
The average home can develop costly problems out of the owner's control. The septic system could fail. Or the plumbing or electrical system could need an entire upgrade. Or the foundation could need extensive repair work.
The interior infrastructure of the home could be compromised by termites, mold, or aggressive rodent infestations.
In other words, a house could be overpriced to compensate the seller against selling the home below value due to unseen maintenance issues.
Request a complete home inspection and appraisal before buying a house with a high price tag. And if your requests are denied, then you know the house is overpriced.
Schedule multiple inspections for older homes. A standard home inspection covers basic systems, but older properties need specialized inspections. Hire separate inspectors for the roof, foundation, electrical panel, and HVAC system. These targeted inspections cost $300-$500 each but can reveal $10,000+ in hidden repairs. Knowing about issues upfront gives you negotiating power or an escape route.
Many homeowners aspire to buy houses in exclusive neighborhoods and communities for the sake of status.
If you need to join a homeowners association or be interviewed by local homeowners just to buy a house, then chances are good you will overpay for that house.
Not only that, but you'll also definitely have to pay extra fees and dues on top of your overpriced house to become a member of such exclusive communities.
Calculate the total cost of exclusive living before committing. HOA fees in luxury communities can run $500-$1,000 monthly or more. Add mandatory landscaping services, architectural review fees for exterior changes, and special assessments for community improvements. Over a 30-year mortgage, these extras can cost $180,000-$360,000 on top of your home price.
Related: Overpaying For A House
There are a few things that a novice homeowner can do to keep from overpaying for a house.
Research the prices of houses you want to buy using online real estate search tools like Trulia and Zillow.
Make a list of what you need in a house. Search for a house that suits your buying needs dispassionately. Don't develop "dream house syndrome" or obsess on a place you really want, instead of need, to the point that you're willing to pay anything for it.
Make a house buying budget and stick to it. Attempting to buy a house outside of your budget will force you to introspectively ask yourself why you want to pay more for a house when you don't need to.
Work with professionals who prioritize your interests. A buyer's agent gets paid whether you spend $300,000 or $500,000, but a good one will keep you from overpaying. Interview multiple agents and ask how they've helped past clients negotiate better prices. Look for someone who pulls detailed comps, challenges overpriced listings, and isn't afraid to walk away from bad deals.
Get pre-approved before house hunting. Pre-approval gives you real negotiating power and prevents you from falling in love with homes you can't afford. It also shows sellers you're serious, which can work in your favor during negotiations. Just don't let pre-approval amounts dictate your spending limit, stick to what you actually budgeted.
Master the art of negotiation. Every house price is negotiable, regardless of market conditions. Starting with an offer 10-15% below asking gives you room to negotiate upward while still landing below the original price. The right questions to ask a mortgage lender can help you understand your negotiating position and financing options before making an offer.
Learning about avoiding home buyer regret helps you maintain perspective during the emotional process of house hunting and ensures you make decisions based on facts, not feelings.
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Don't go through the home buying process alone. The right mortgage team makes a massive difference in whether you overpay or get a fair deal. They can spot overpriced properties, connect you with reliable inspectors, and structure your financing to keep payments manageable.
Ready to find your home without overpaying? Contact our experienced mortgage team and get the personalized guidance you need to make smart buying decisions.
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