Why You Need to Bid Over Asking Price in Today’s Housing Market
If you are looking to buy a home in 2023, you may have noticed that the housing market is very competitive.
There are more buyers than sellers, which means that many homes receive multiple offers and sell for more than the asking price. In fact, according to the National Association of Realtors (NAR), the median existing-home sales price in July 2023 was $410,200, up 15.8% from a year ago.
So how can you stand out from the crowd and increase your chances of getting your offer accepted?
One strategy is to offer over the asking price from the start.
Here are five good reasons why this may be a smart move in today’s market.
5 Reasons to Bid Over Asking Price
- Low inventory: As briefly stated above, competition for houses right now is fierce, despite the higher interest rates and inflation.
The most recent report from Existing Home Sales shows that the existing inventory of available homes is very low – less than 1 million homes – and some of these are already under contract!And this inventory issue is not going to improve for two main reasons:
First, as inflation trends slow and interest rates start to come back down, there will be more people able to buy.
Second, in general, the U.S. population is increasing by leaps and bounds. And if you are thinking about buying a home in Florida, then you know our population is on a constant growth trajectory.
There are more buyers every day with fewer available homes. Competition is only going to get tougher. You have to bid over asking price out of the gate to set yourself apart from the competition.
- Avoid a bidding war. A bidding war is when two or more buyers compete for the same property by raising their offers until one of them wins. Bidding wars can drive up the price of a home and cause a lot of stress and uncertainty for buyers.
By offering over the asking price from the start, you show the seller that you are serious and motivated, and that you are willing to pay a premium for their home.
This may convince them to accept your offer right away, or at least give you priority over other buyers.
- Show your love for the home. Sometimes, sellers are motivated by emotion and not just money. They may have a sentimental attachment to their home and want to sell it to someone who will appreciate it and take good care of it.
By offering over the asking price, you demonstrate that you love and highly value their home. This may appeal to the seller’s emotions and make them favor you over other buyers.
- Compensate for a lower appraisal. An appraisal is an estimate of the home’s value by a professional appraiser. It is usually required by lenders to ensure that they are not lending more money than the home is worth.
However, in a hot market, appraisals may not keep up with the rising prices and may come in lower than the agreed-upon sale price. This can create a problem for buyers who need a mortgage, as they may have to come up with extra cash to cover the difference or renegotiate with the seller.
By bidding over the asking price, you can anticipate this scenario and show the seller that you are prepared to pay more than the appraised value if necessary.
- Potentially beat cash offers. Cash offers are offers that do not depend on financing from a lender.
Cash offers are attractive to sellers because they eliminate the risk of financing falling through and speed up the closing process. However, cash offers are not always the highest, and they may not reflect the true market value of the home.
By offering over the asking price, you can compete with cash offers and show the seller that you are willing to pay more than what cash buyers are offering.
Of course, offering over the asking price is not always the best strategy for every buyer and every situation. You should always consult with your real estate agent and your lender before making an offer, and stick to your budget and your goals.
At Gulfside Mortgage Services in Venice, FL, we are available to help you navigate this process and develop a strategy that will work for you or your clients.
Why You Should Not Wait to Buy
Despite higher interest rates and inflation, if you are teetering on the fence – STOP. Now is the time to buy in Venice, Florida and not wait for a few very good reasons:
- Historical data shows that housing prices will not go back down but will continue to increase. Stop hoping that you can get a house you love for less than current prices.
- As explained above, inventory will not get better, so stop waiting for that.
- Interest rates, however, will get better, at which time you can refinance. Go after your dream house now before it goes up in price and out of your range. You can refinance later for a better interest rate.
