The real estate market is currently booming. With inventory in short supply, demand is high as interest rates remain attractive. If you think you have to offer a high bid to even make it onto the seller’s radar, you wouldn’t be too far off.
In the current market, more than 50% of homes are selling for over the asking price, according to real estate brokerage Redfin. The seller is in for a nice payday while a bidding war often emerges among multiple potential buyers.
It is not unusual for potential buyers to far exceed the asking price. In some cases, bidding even goes $50,000 and $100,000 over what the sticker price says. Homebuyers might throw caution to the wind and offer more than the fair value of the home, or what the appraiser says it’s worth.
Indeed, when it comes to getting your dream home, you will do whatever it takes to be sure that you are the one left standing when the dust settles. This includes submitting an offer to your realtor that goes above the asking price to establish that you are serious.
How Do Offers Work on a House?
Even though you may be submitting an offer, that doesn’t mean it’s a done deal. Instead, you are giving the seller a chance to see what you bring to the table. If they accept it, you will likely embark on a journey to obtain a mortgage. Alternatively, they might counteroffer. In this case, you’ll have a decision to make — either accept the seller’s terms or come back with a revised offer meeting in the middle.
Should You Go Higher or Lower on Your Offer?
Soon after you find the place that you want to call home, one of the first questions you’ll want to ask yourself is, “How much should I offer on a house?” It is a question that has stood the test of time even as the real estate market has evolved in a digital age. In theory, you’ll want to find a sweet spot that works for you and the seller. In reality, however, it could take some back and forth to accomplish this.
On the one hand, if your price is too low, the sellers are likely to scoff at the bid. The last thing you want to do is insult the seller by submitting a lowball offer. On the other hand, if you go too high, you could wind up paying more than you had to on one of the biggest purchases you’ll ever make in your life.
How Much More Than Asking Price Should I Go?
When asking yourself, “How much over asking price should I offer on a home in 2021,” keep in mind that submitting an offer is more of an art than a science. Fortunately, there is a formula you can follow.
First, do your research and find out how much money other homes in the neighborhood are selling for. This will give you a gauge by which you can structure your offer. Your real estate agent will have access to supporting data to provide a comparative market analysis so that you are not just basing your number on one fly-by-night deal.
Next, don’t be afraid to be picky about choosing a realtor. Someone with experience and a successful track record for getting deals done can go a long way in your decision-making process. Look for someone who knows the market, has skin the game, and will fight for your offer to prevail.
Should I Offer the Full Asking Price on a House?
In some instances, asking “should I offer full asking price on a house” might not be enough. The agent might need to get creative to get the deal done. This might involve negotiating a higher down payment or shorter contingencies, all of which could make the difference if there are multiple offers.
Your agent should be able to pick up on anecdotal signs, such as if the house has been on the market for months. In this case, the tables could turn in your favor because the seller might be more likely to accept a lower price to make a deal. In addition, find out if they’ve lowered the price once before. This is a sign that they are willing to see reason.
Even if your offer goes below the seller’s rock-bottom price, they could come back with a counteroffer that works for you. Information such as how long a house has been on the market is widely accessible, even to the public.
How Low to Offer on a House?
When contemplating how low to offer on a house, keep some rules of thumb in mind. Is real estate currently a buyer’s or seller’s market?
In 2021, it just so happens that the market is more skewed toward sellers, so you could have your work cut out for you. Keep some guardrails in place too. If you ask Michael Russell of Ratchet Straps USA, he says to refrain from offering less than 25% of the asking price. Anything below that threshold could prove to be a waste of the seller’s time.
Look for points to support your argument, such as repairs that need to be made that will cost money out of your pocket, such as a new roof, for example. Nonetheless, if you are a gambling type, you could always roll the dice and see if the low offer sticks — as long as you are willing to walk away if it comes to that.
Sometimes the pendulum will swing in the opposite direction, and you might want to submit an over-asking price offer. In a seller’s market, such as in 2021, when demand is outpacing supply, you might need to put your money where your mouth is to impress the seller. Another situation that might warrant an above-asking price offer is if the asking price is too modest based on the comp data.
Ask yourself, “Should I offer the full asking price on a house?” In this case, take inventory of the situation. If it’s an even keel market that doesn’t slant toward the seller or buyer, offering the asking price could just do the trick. Also, rely on your agent’s data on comparable selling prices in the area.
No matter if you go higher or lower with your offer on a house, keep contingencies as a bargaining chip to help your cause.
Explore Ratecloud’s Mortgage Options
Now that you have more information about how much to offer on that new house you’ve been eyeing, are you ready to learn more about a new mortgage?
Ratecloud can help you with that. Not only will a digital mortgage give you a jumpstart on the process, but it will get you into your new home faster and cheaper than would otherwise be possible. Get started on your digital mortgage application today!
