Can Someone Explain This to me?

I can't figure this out. Please take a look at this listing in Nutley, NJ. The house is listed at $825,000. I have been looking at houses in the area for the past year or so and most houses of the same size and features and in the same neighborhood have been priced in the $500,000-$600,000 range. So right off the bat it is way out of sync with what the market will bear. What further adds to the strangeness is this house was for sale a little over a year ago for $590,000 and it did not appear to sell since it is on the market with a different realtor now. In the pictures you can see that it appears to have updated floors, kitchen, and living room but what they do not show is the recent water damage. When we looked at it a year ago we were impressed with the updates but we went back a few months ago and noticed that water was pouring into the rooms from the ceiling. We called the listing agent and told them about it. When we went back after seeing this listing we checked the room from the outside and noticed that there was extensive water damage to the floor and ceiling.
So to wrap this up this house was not able to be sold with brand new updates at $590,000. Now the updates are ruined by water damage (along with other parts of the house), the average price for homes in the area is going down, and the house is now priced $825,000.

Am I missing something? Does this make sense to anyone else.