The Red Flags That Reveal If Your Dream House Is Overpriced

In searching for a home, you might stumble across a place that looks perfect, except for the asking price—by a large margin. Given the location, the amenities, the number of bedrooms and baths, the price could be way over what you’d expect, especially given the prices of homes nearby.

So what gives? Is the seller trying to test the ceiling of what they can get, or are they telling you you’d need to make a crazy offer to get them to sell? Either way, is such a place worth your time? 

The 2026 housing market is something of a study in expectations vs. reality. Realtor.com® predicts that home prices will rise 2.2% this year, but inflation is expected to outpace those gains—meaning “real” prices will actually decrease. Understanding whether a home you’re interested in is over your budget or worth looking into further may be more difficult than ever, but there are some ways to figure out which is which. 

Is that home actually overpriced? 

Home sale asking prices are typically the result of careful consideration by the seller as well as the listing agent. Few sellers want to price people out of buying their homes. You’ll have to do some research to decide whether the asking price is unreasonable. 

In this case, as a buyer, you need data. That’s why the first step is often to find comparable sales—your agent can pull MLS data, or you can check recent sales on Realtor.com. Homes in the area with similar square footage, bed and bath count, and condition that have sold in the past three to six months are your benchmark. If the home you're interested in is priced 10% or 15% higher than recent comps with no obvious justification—like a major renovation or premium lot—that's a red flag.

Additionally, look at the home’s days on market.

"A home that's been on the market for two or three weeks often reflects a seller with high expectations," says Alan Taylor, a Los Angeles real estate agent. "When a property sits on the market for an extended period with little or no activity, buyers gain leverage.”

A home that is new to the market may be on the higher end of what’s possible. If it’s a home you love, you’ll need to decide whether you think other buyers won’t snap it up first. 

Why sellers overprice their homes

Sellers set high prices for their homes because they want to make the most money they can from the sale. But a high asking price is a risk as well—a house languishing on the market will raise questions from buyers, and the holding costs are worth considering as well. So why take the risk?

"When buyers fall in love with a home, but the price feels detached from reality, the only real way to know whether a seller is 'testing the market' or simply overpriced is to truly understand the market itself," says Taylor. “Value can be subjective.” 

What adds to that value? Sometimes it's emotional attachment. The sellers aren’t necessarily trying to game the system—they just can't see their house objectively. In other cases, sellers are deliberately testing the ceiling, pricing high with the expectation they'll negotiate down. Overpricing can also reflect bad advice from an inexperienced agent who promised a high listing price to win the business, figuring they'd manage expectations later.

The trickiest scenario is when a seller isn't actually motivated to move. Maybe they're just curious what they could get, or they'd only sell for a premium that makes relocating worthwhile. If a home is priced significantly above comps and shows no signs of budging after months on the market, the seller may not be serious—and you're better off focusing your energy elsewhere.

How to approach an overpriced home

Before writing off a high-priced listing entirely, make sure you understand what you're actually looking at. Some homes command premiums for reasons that don't show up cleanly in comparable sales data. A house with a renovated primary suite, high-end appliances, or a finished basement might be worth more than a similar home sold six months ago that lacked those features. Location nuances matter too—being on a quiet cul-de-sac versus a busy street, backing up to open space instead of another house, or having walkable access to parks or shops can all justify price differences that raw square footage comparisons miss.

That said, if you've done your homework and still believe the home is overpriced, timing your offer matters. 

“To make a low-ball offer in the first two weeks of the home going on the market will almost never work because the seller usually thinks their price is correct,” says Kati Spaniak, a Florida-based real estate agent and founder of Truth in Real Estate. “Most of the time the agent has provided the seller with the correct price, and the price that is listed too high is typically the seller's choice.”

Don't rush in with a lowball offer on day one unless you're comfortable with it being ignored. Instead, watch the listing. If the home sits without activity or the seller drops the price, that's your signal to act.

“After two weeks, it's worth submitting a lower offer that the buyer feels is market value for the home and seeing what happens,” says Spaniak. “Because it's not always where the offer starts, but where it finishes. And an offer that is in writing is much, much different than a verbal offer that may or may not materialize.”

When you do make an offer below asking price, structure it to be taken seriously: Taylor suggests keeping initial offers within 5% of asking—going below that is “a little more of a disconnect.” Come in with strong financing pre-approval, be flexible on closing dates if that matters to the seller, and be prepared to explain your reasoning with comparable sales data. Your agent can frame the offer as fair rather than insulting by pointing to objective market conditions.

As Taylor puts it: "If you really want to know whether you're overpaying, you have to be willing to let the home go."

If your offer gets rejected, or you pass, and no one else buys it either, you'll know you read the market correctly—and you might get another chance to negotiate later.

The costs of chasing a home

Even if you successfully negotiate an overpriced home down to something closer to market value, the pursuit itself comes with costs. Drawn-out negotiations eat up time—weeks or even months you could have spent finding a better deal. Meanwhile, other properties that might have been perfect slip through your fingers. The emotional toll adds up too: Getting attached to a house, making multiple offers, and dealing with repeated rejection or counteroffers that go nowhere can be exhausting.

There's also a real financial risk. If you overpay to secure the home, an appraisal could come in low and kill your financing anyway, forcing you to cover the gap in cash or walk away from your earnest money. And if you stretch beyond what the home is worth, you could find yourself underwater on your mortgage from day one—owing more than the house would sell for if your circumstances change.

Home prices may be negotiable, but not every negotiation is worth having. Focus your energy on sellers who are serious, properties that pencil out, and deals where the math actually works. The right home at the right price is worth waiting for.