No one WANTS to pay more than the asking price for a home. In fact, most of us cringe even just thinking about the idea. But the fact is, especially in certain markets, paying above the asking price is a reality. So when should you aim high and offer over the listing price? Here are a few scenarios:
- It’s a HOT seller’s market. This is the current situation here in Connecticut. In fact, according to a NY Times article from April, Torrington had the 3rd biggest increase in net in-migration in the US. A seller’s market is when there are more buyers looking for homes than there are sellers or homes available. The demand for homes is higher than the supply of homes available to buy. This means there is a lot of competition and you often have to act fast and bid aggressively to get an offer accepted. In a hot seller’s market, homes can sell for at least 10% over asking price.
- You know there are multiple offers. Multiple offers are wonderful for sellers but stressful for buyers who are trying to avoid a bidding war. If you can, find out if there are other offers before you make your offer. If so, offering over asking may get your offer accepted without turning it into a bidding war.
- It’s underpriced. If you know the property is well below fair market value, a seller may intentionally do this to create a bidding war. In this instance, offering over asking from the start, may help you get your offer accepted right away. Your realtor should be able to tell you what they think the value of the property is and how well it’s priced so you can determine your offer.
- You know there are cash offers. All cash offers can be a seller’s dream, especially if they have a solid offer price too. This means there are no delays
orto worry about as the buyer is not obtaining financing. If you know you are competing against a cash offer, you may need to bid over list price in order to get your offer accepted.
- You really want the house. Buying a home is a big financial decision and you can’t help but bring emotion into it. If you fall in love with a house and don’t want to risk losing it, offering over asking price can help you lock down the property.
Offering over asking price has become a much more common practice over the past year due to the low inventory of homes for sale in our area. Keep in mind that, even though you are willing to pay over asking, it may not be an option if you need to obtain financing. Your home will need a bank appraisal to make sure that you aren’t overpaying and the home is worth what you are paying for it. If the home doesn’t appraise out at the price you offered, and you still want to buy it, you’ll need to come up with the difference out of your own pocket.
If you have questions about how the mortgage process works, specifically the appraisal process, don’t hesitate to contact anyone on our lending team. Happy house hunting!
Vice President, Senior Mortgage Lender
NMLS MLO ID: 532621