It’s a seller’s market — and those who list their homes have the potential to make a lot of money.
Right now may not be a good time to buy a home. Though mortgage rates are very competitive, home prices are extremely inflated because there’s not a lot of inventory to go around.
But while today’s real estate market may be challenging for buyers, it’s great for sellers. In fact,
Some 53% of sellers expect that they’ll get their asking price once they put a home on the market, according to a recent survey by Realtor.com. But 24% expect to get above their asking price.
Why are homes selling above asking prices?
In a normal housing market, you might find the occasional bidding war, where two or more buyers duke it out over the same home, all the while raising its sale price in the process. But in today’s housing market, record low inventory is making bidding wars more of a mainstay. In fact, around 20% of sellers expect their home to wind up in a bidding war.
Not only are bidding wars driving home prices up, but many potential buyers choose to make an offer on a house that is above the seller’s asking price in an attempt to avoid a bidding war. And if you’ve been having a hard time getting an offer accepted, that’s a tactic you may want to try out, too.
Imagine a home is listed for $300,000. In a bidding war, that home price could eventually be driven up to $350,000 if competing buyers keep raising their offers by $5,000 or $10,000 increments in an effort to win.
Now, let’s say you’re interested in that $300,000 home, and you decide to make an initial offer of $320,000, or $20,000 over asking price. The seller may be so happy with that offer that they decide to accept it on the spot and put the home under contract. That could, in turn, save you money on that home — even if you do end up paying more than what the home is listed for.
In fact, some sellers in today’s market may be slightly underpricing their homes in an effort to drive a bidding war. But again, coming in with an offer above asking price could work to your benefit as a buyer.
How much should buyers offer?
Making an offer above a home’s asking price could lead to a contract. But be careful: you don’t want to go overboard.
First of all, the higher a price you pay for your home, the higher your mortgage payments will be. Also, if the home you’re buying doesn’t appraise for its sale price, you may not be able to get the mortgage you need to finance that home.
In today’s red-hot housing market, sellers clearly have the upper hand, and their confidence is evident. Making an offer above asking price could help keep the home you want out of a bidding war. And that could, in turn, save you not only a lot of money, but a world of stress.
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