You’ve found a house and are preparing your offer – but have you considered submitting a bid above asking price?
In a booming market, homes can often end up selling for above-asking price, and several factors contribute to this phenomenon. It’s in every buyer’s best interest to know when to offer more, and how to do it strategically.
How Much Inventory is Available?
In a seller’s market, inventory moves quickly, and sellers often have to negotiate multiple bids soon after their property is listed. Look at your target area and see how long properties stay on the market. If you regularly see properties go under contract between zero and four months, you’ll likely have a better chance of having your bid accepted if it is above asking price. Compare comparable sales to your ideal property, and you’ll be able to track whether homes are selling at their listing prices or above.
Do You Have an Opportunity to Snag a Deal?
Did you find a perfect home that has a surprisingly low asking price in a hot neighborhood? Now is not the time to see if you can push the price down even further. If a deal is available, you won’t be the only potential purchaser making an offer, so consider making an offer above asking price to beat out any other deal seekers.
Will You Need Contingencies from the Seller?
Submitted offers contain more than just the amount you’re willing to pay for a property – they can also include contingencies that you need from the seller. For first-time buyers, if you’re competing against offers from people who have done this before, you may need contingencies whereas they know how to handle the process themselves. Hence, you’ll lose out to these experienced buyers except in the cases where you are offering to pay more. This is also when being preapproved for a mortgage can be helpful in determining your offer strategy, as it will keep you within the guidelines that your lender set and show sellers that you have the financial resources to follow-through.
Is the Property Appraisable?
The offer you submit on a property is the amount you’re willing to pay, so you can’t offer more than the appraised value of the property if you’re hoping to get financing. Appraisers look at comparable sales in the area to determine the relative value of the property. However, if you offer above asking price and the appraisal shows the value to be under or near that asking price, then you won’t be able to receive financing in full and may be responsible for making up the difference out of your wallet or walking away. Again, keeping an eye on comps and sale prices will help you determine a range of values for the property.
Is the Property Your Dream Home?
If you’ve found a house that you can see yourself in for the long run, or you’ve been searching for months with no luck and have finally found something, offering above asking price can ensure that you don’t lose out to another bidder. However, this doesn’t mean you have to be hasty if you are just starting out looking at homes, as you want to be sure you stay within your budget while still getting the house you need.
Whether you’re ready to buy a home or ready to start looking, your ideal first step is to get pre-qualified for a loan. Answer a few questions here, and a home lending expert will contact you with available options.