The saying “Don’t just take their word for it” is true for most cases in life, especially homebuying. For instance, real estate experts say that you should never accept the asking price of a house without questioning it. You should check the price in a house value calculator in Canada, do the required research, and then trust the number. However, there’s a tricky bit involved here. At times, two seemingly similar homes can have two very different price tags. Let’s dig into the possible reasons behind this and find the best approach you can take as a homebuyer.

Factors Behind Drastically Different Price Tags of Two Similar Homes

1. Location, Location, Location – And Micro-Location!

Sure, both houses are in a good location/neighbourhood. But you need to see where their exact spots are in the neighbourhood. Believe it or not, the same location can make one house way more costly than the other.

Homes That Tend to Cost More – 

• A home on a peaceful cul-de-sac
• A house near a park, a top-rated school, or other key amenities
• A house facing a park, lake, or green space

Homes That Tend To Cost Less – 

• A house close to a main road
• Houses near commercial or industrial areas

2. Bigger Yard Equals Bigger Price Tag

The home with the higher price tag might have a bigger backyard, perfect for a pool or garden. Meanwhile, the other house may have a smaller, oddly shaped, and cramped yard or no yard. Most homebuyers look for a spacious yard in their dream home.

3. Condition and Upgrades Make a (Big) Difference

Two homes might look the same from the outside, but from the inside, they can be worlds apart. One might have gleaming hardwood floors, a renovated kitchen or new windows. On the flip side, the other could have outdated fixtures, worn carpets and a kitchen that looks straight out of the 80s. We can bet the updated home will cost more. After all, buyers are willing to pay more for move-in-ready homes with modern upgrades. According to a Bright MLS survey, over 56% of homebuyers prefer properties that are move-in ready with no repairs needed.

4. Better Layout and Flow Make a Home Feel Right

The layout can also impact the selling price of two similar homes. If the home’s layout feels more functional and flows better, it will naturally attract more interest and a higher price. But if the house has a more chopped-off layout with small, closed-off rooms, buyers will not find it appealing. Even simple things like how the kitchen connects to the dining room or whether there is a bathroom on the main floor can influence a buyer’s decision. 

5. Timing is Everything – Market Demand Plays a Huge Role

The listing time of the house can have a huge impact on the price. A house might have secured a high price with multiple offers because it hit the market when buyer demand was strong. Meanwhile, the other house may have been listed in a slower season, leading to a lower sale price.

6. The Story Behind a Home Can Shape Its Price

Some homes sell for less because of their history. A house where a crime happened, a property with a history of hauntings, or even a home linked to a well-known scandal often sells for less than its actual market value. A classic example of such a stigmatised property is the Amityville Horror House. This house became infamous after a tragic event in 1974 – the then-homeowner murdered his family on the property. Over the years, this house has changed many hands. It also underwent major renovations to remove its eerie reputation. Despite these efforts, its history stuck. In 2023, the house sold for $240,000 less than its asking price.

7. Sometimes, It Is Not About the House – It Is About the Seller’s Situation

Finally, it often comes down to the seller’s motivation. If a seller is in a hurry – maybe they have already bought another home or are relocating for work – they might price their home lower for a quick sale. On the other hand, a seller who is not in a rush might hold out for a higher price, even if it takes longer to sell.

So Which One Should You Buy – The Cheaper or the More Expensive Home?

Buying the Cheaper House

It’s obviously tempting to go for the cheaper house and save more money. But be careful; the house could have hidden issues that cost you more money in the long run. To avoid this pitfall, here’s what you should do:

1. Figure out the reason why the home is priced lower – near a noisy area, has an awkward layout, or the seller needs to move out quickly. Then, consider whether these issues are things you can live with or are deal-breakers for you.
2. A professional home inspection is a must in this case. The inspection process can help you uncover the actual condition of the house.

If you find no deal-breaking issues and are truly confident about the house, then and only then, move forward with the cheaper house. Remember, the goal is to get a good deal, not a headache. 

Buying the More Expensive House

At times, you may consider every angle you can think of and still struggle to see why the price of a house is so high. Yes, this can indeed happen. Some homes are simply priced high for all the invalid reasons. 

• The seller might be emotionally attached to the home and price it unreasonably high. 
• The homeowner may be trying to recoup the cost of expensive upgrades that don’t actually add value to the house. 
• The seller could have set the price based on the estimate provided by a house value calculator in Canada. These tools just give an estimate; they do not take into account buyer preferences, specific conditions of the house, or local market conditions. 

So, before you convince yourself that a higher home price equals better value, take a step back and do your due diligence. Dig a little deeper and find why the house is priced higher than similar homes in the neighbourhood. If possible, get an appraisal to see if the price is fair. A home appraisal can give you a clear, unbiased value based on the property’s condition, location, and recent sales of similar homes. If you find that the high price is indeed justified, then it could be worth your investment.