Asking Prices in a Seller’s Market
When it’s a seller’s market, anything goes as far as pricing. “It’s not uncommon for buyers to submit offers for $50,000 to $100,000 over asking price, waiving appraisal contingencies, and paying $30,000 to $100,000 above appraisal,” says real estate broker Stephanie Williamson. But this might not be the best thing for your money in the long run. “In my opinion, this is a recipe for disaster if you don’t run your numbers. In the event the market corrects or there’s a downturn, it poses a risk for the owner to become upside down in the loan,” says Williamson. While it is not uncommon to pay one to three percent over the list price, Williamson suggests talking to your realtor and lender to come up with a number that is best for you, so you’re not putting in an offer that’s beyond your means. Although real estate trends seem to persist, there are no guarantees about what could happen with the housing market in the future. Since a home is a big, long-term financial decision, it’s important to treat it as such and consider all your options carefully when determining how much to offer—especially if you’re a first-time homebuyer.
Tips to Make Your Offer Competitive
“Always ask for a comparative market analysis (or CMA) from your agent before you make an offer,” says realtor Scott Bergmann. “This will make sure that you are not just going off the listing price but a more factual and data-driven offer.” While these in-depth reports and data can be challenging to navigate, your real estate agent should be able to make sense of it to come up with a number that is right for the market—and your budget. “Choosing an agent that is not only aggressive but has integrity will save you in the long run,” says Williamson. Your agent will be the one doing market research with you and figuring out the best way to make your offer stand out, especially if you find yourself in a bidding war. As a buyer, it’s a good idea to know which terms are most important to the seller, such as price, shortened contingencies, or a flexible timeline."[Buyers] can rely on their real estate agent to give them the information they need to make a competitive offer," says real estate agent Sherry Chen. If you’re really set on a home, (especially in a competitive area), have your agent talk to the seller to figure out ways to make your offer work and any other terms besides price that will help you close without having to pay an unreasonable amount over asking. Bergmann suggests figuring out the affordability of any amount higher than the actual listing price since homes can and do sell over the asking price in competitive markets. “Have your personal financial boundaries set before you make an offer. It doesn’t matter how much you love a home, you have to be able to afford it consistently,” advises Bergmann. Work with your lender to calculate how much the monthly mortgage payments will be to determine an offer amount that is feasible. It’s also a good idea to reflect on whether you genuinely love the house and the neighborhood—and if the house actually appraises at the value that it is listed for—before you determine how much to offer.
