Offering over asking price on a house often makes buyers wince. But let’s face it, paying above list price is just a reality in certain circumstances – at least if you really have any hopes of getting that house!
So when exactly should you aim high and offer over asking? Check for these signs below that suggest this pricey move is essential.
It’s a Sellers Market
A seller’s market is when there are more home buyers than sellers – meaning demand outpaces the supply of homes for sale. As a result, home buyers in a seller’s market face a tough challenge: Due to increased competition, they often have to act fast and bid high to woo sellers into accepting their offer.
Looking at a couple of key factors can help you determine whether you’re in a seller’s market. A good rule of thumb is if homes are selling in your area in less than 10 days, it’s a strong seller’s market.
You will also want to evaluate what homes are selling for compared with their list price. In a strong seller’s market, the final sales price is typically at least 10% higher than the asking price. Your S&D Real Estate Agent can pull this data for you.
You Know You’re Going Up Against Other Offers
Bidding wars can erupt, even in a buyer’s market – sometimes all it takes is an aggressively priced home, which is why it’s important to find out whether there are other bids on a property before you make an offer. So go ahead and ask; generally, it’s in their interest to say if other offers are on the table since it might spur you to act fast.
The House is Blatantly Underprice
Some sellers decide to list their home well below the property’s fair market value in an effort to spark a bidding war. In that instance, it may make sense for you to offer over asking price in order for your bid to outshine other offers.
To figure out if a house is underpriced, you and your agent should assess recently sold homes in the are. This will give you a baseline that you can use to calculate a home’s true market value, which you can use as a benchmark when pricing your offer.
You’re Competing with Cash Buyers
Home sellers swoon over all-cash offers for one simple reason: It means there’s no doubt that you’ve got the coin to close the deal. Consequently, all-cash home buyers have a distinct advantage over those who need a mortgage, because there’s no guarantee that lenders will fork over the money.
Cash offers made u 29% of single-family home and condo sales in 2017, according to ATTOM Data Solutions. So, if you know you’re competing against one, making a bid that’s over a home’s list price persuade the seller to accept your offer.
The Seller Isn’t Motivated
Some home sellers have to unload their house as quickly as possible, say, due to an imminent relocation for a new job or a need to raise cash to purchase their next home. Other sellers, though, aren’t quite as motivated and they may just be listing their house to “test the market” and see what sized offer they can get, which is why it’s important to ascertain what the seller’s motivations are.
If you find yourself dealing with an unmotivated seller, offering above the home’s list price could make the seller bite. The caveat, of course, is you don’t want to offer so much above the asking price to the point where you significantly overpay for the home.
You Absolutely Adore the Home & Can’t Risk Losing It
Sometimes buyers simply fall head over heels for a house. If you find a house and feel your heart would be broken if you lose it, offering over asking price can help you lock down the property.
You Can Afford To Pay Over Asking Price
One word of warning: If you’re obtaining a mortgage, be aware that if you pay way over what a home is really worth, the home still has to pass appraisal in order for your lender to provide you with the loan you need. Any difference between a home’s appraised value and your contract price would have to come out of your pocket. As always, you’ll want to rely on your S&D Real Estate Agent to help you craft a winning offer you can afford.