Also referred to as the list price, the asking price of a home is the amount the seller wants the buyer to pay to purchase the property. Although it’s possible to buy a home at or below the asking price, offering over the asking price is actually quite common, as it’s not unusual for real estate agents to intentionally list a property at a slightly lower price than the home value to attract more potential buyers.
A seller’s market – a market condition in which there are fewer homes available than there are buyers looking to purchase – motivates buyers to be willing to spend more money than they would otherwise. This is why the shortage of housing in a seller’s market can often lead to bidding wars. Offers submitted during a bidding war are often above the asking price.
In many parts of the country, we are in what would be considered a “seller’s market”, so buyers must adapt. A good rule of thumb: ‘If houses are selling in your neighborhood in less than 10 days, it’s a strong seller’s market’.
Here are a few other reasons you may want to bid more than the list price:
- You love the home and want to make sure you get it
- You know there’s a bidding war or lots of competition for the property
- The house is undervalued (comparable sales can help you judge this)
- There are cash bids on the table
Every listing situation is different, which means there’s no uniform answer to how much you should offer above the asking price. However, it’s good to be prepared as the bidding process typically happens very quickly, which means buyers must be ready with a number in mind when they submit an offer.
With all this information in mind, you may be wondering if offering above the asking price is worth it. The answer to this will ultimately depend on the specific property, your financial flexibility and real estate market conditions – but in general, there are a few pros and cons to consider.
For example, offering more than the asking price may result in winning a bidding war more quickly. But on the flip side, it likely also means paying more for a home than its actual value. This may be worth it if it’s your dream home, but most importantly, buyers should always ensure their ability to fulfill their offer before submitting a bid.
Some real estate professionals suggest offering 1% – 3% more than the asking price to make the offer competitive, while others suggest simply offering a few thousand dollars more than the current highest bid.
Especially in a seller’s market, carefully and intentionally planning your offer ahead of time can mean the difference between winning and losing a bidding war. By researching the housing market, waiving contingencies, and potentially offering above the asking price, you can set yourself apart from other potential buyers.
More Advice for Home Buyers in Today’s Market:
4 Major Reasons You Need a Buyer’s Agent – Utah Real Estate Experts