Over the last year, record-low interest rates and limited supply have bolstered demand across the country. In other words, more people than ever are buying. It’s a seller’s market in locales across the nation, so buyers may need to go the extra mile to stand out. One popular differentiation technique is offering above asking price, though it’s certainly not right for everyone.
Is offering more than the listed sales price the right move for you? Answer these questions to determine if it’s worth it for you and your budget.
Is it within your budget?
You should only ever offer above the asking price if you can afford it. When it comes to purchasing a home, budget is king, so you’ll want to stay mindful of monetary constraints. Anything you tack onto the asking price will need to fit into the larger financial picture, no matter how much you may love this particular home.
Is your market particularly competitive?
While markets are still heating up across the country, purchasing in certain cities will prove much more cutthroat than others. Offers may ratchet up in particularly popular locales, like Austin, Texas or Raleigh, North Carolina, but, if you happen to be looking in less sought-after areas, you may not need to submit such a generous offer (Forbes, 2021). A local real estate agent or home finance professional can help you determine just how hot your market is and plan your homebuying strategy accordingly.
Are you involved in a bidding war?
If you’re hoping to win a bidding war, offering above the asking price is almost expected. Competing in this way with other buyers isn’t everyone’s cup of tea, though, so ensure your heart is in it before you place a bid. If you decide to go above asking, you’ll want to determine a hard-stop amount, or your absolute maximum. This will help you stick to a budget in the heat of competition.
Are you up against a cash offer?
Sellers tend to prioritize cash offers because they often close faster and more efficiently (NerdWallet, 2021). In fact, a study from the University of California San Diego found that sellers often opt to accept cash offers that are 12% lower than similar financed offers. So, if you’re serious about securing the home but are bidding against a cash buyer, you may need to make your offer even more enticing.
Is the seller hesitant to let the home go?
Unfortunately, some sellers list their home simply to test the market and have no real intention of selling. In other cases, they may just be having second thoughts. If the seller is reluctant to sell to anyone, offering some additional money could tip the scale in your favor.
Do you really love the home?
Once you’ve ensured that offering above the asking price makes sense logistically, you can consult your emotions. If this particular property feels perfect for you and the added expense is worth it, it may be a good idea to bump up your offer. Just remember that the right home is always within budget. If the seller rejects your offer or if the bidding war escalates too far, it simply wasn’t meant to be.
A home is likely your largest investment, so before submitting an offer above asking price, you’ll want to ensure it’s the right move for you. In answering these questions, you can determine if the added expense works both logistically and emotionally. Then, with a stellar homebuying team and a little luck, you could be securing your dream home in no time.
Published on August 2, 2021
