Putting an offer on a house is exciting and nerve-wracking all at once. You don’t want to overpay, but you also don’t want to risk losing out on a house you truly love. Offering more than the seller’s asking price on a house may seem counterintuitive, but in certain market conditions and scenarios, it really is the best decision.
5 Instances When it Makes Sense to Offer More than the Listing Price
It’s a Seller’s Market
During a seller’s market, the competition for homes is high. Sellers may receive multiple offers in just a few days, or even hours, which means buyers need to act fast and be prepared to bid high. To determine if it makes sense to offer more than the listing price, you and your real estate agent will look at a number of market variables, including the difference between the asking price and selling price on recently sold homes, as well as average days on the market.
The Home is Underpriced
Even in a buyer’s market, bidding wars can occur if a home is “priced to sell”. In this instance, you may need to offer above asking price to ensure your bid stands out. To help you price your offer accordingly, your real estate agent will calculate the home’s true market value by assessing recently sold homes in the area, and find out if there are already bids on the property before you make an offer.
You’re Competing with Cash Buyers
Sellers favor cash offers because they know they are more likely to close, and they tend to close faster. The challenge with a mortgage is that, even if you are pre-approved, the bank can deny the loan later, particularly if the home doesn’t appraise for the purchase price. In order to compete with an all-cash offer, buyers who are relying on conventional or FHA loan financing typically need to offer more than the asking price.
The Seller isn’t Motivated
Sometimes, a seller just isn’t really ready to sell. Unlike homeowners who need to close quickly because they’ve already purchased another home, or they have a baby on the way, or they are relocating for a job, these sellers have no imminent plans. They could just be listing their home “to see what they can get for it.” In this case, you may need to make an offer over the home’s asking price to get the seller’s attention.
You Don’t Want to Risk Losing a House You Love
If you are head over heels in love with a house, and know your heart will be broken if you lose it, offering more than the asking price will make it harder for another buyer to swoop in and steal it. Likewise, if you’ve been house hunting for months, and you’ve finally found a home you like, you may want to offer above list price and end the search once and for all. Just be careful not to let your emotions overtake logic. Keep your budget in mind and avoid committing to more mortgage than you can afford.
More Home Buying Tips
The process of buying and selling a home is emotional for both buyers and sellers, which is why it’s best to leave the negotiating to the professionals. Top producing real estate agents negotiate well because they know how to keep a level head and represent their client’s case in the best possible light. So take advantage of your real estate agent’s experience and rely on him or her to help you craft a winning offer that you can afford.