Before the hot housing market that we’re in today took effect, homebuyers could simply search for a home and make an offer. Due to the current market conditions, that is no longer the case.
Serious homebuyers are having to bid over the listing price just to find their dream home. Competition is fierce, and there are a lot of people looking at the exact same house as you.
While it’s still possible to purchase a home at listing price – and even ask under the listing price – it’s not as simple as it used to be. Many factors come into play when it comes to winning the bidding war, such as the type of mortgage you have, your qualifications compared to the competition, and more.
How much should you bid on a house? Should you bid over or under the listing price? Let’s dive into the current market and find out!
When Should You Bid Over the Listing Price?
In today’s sellers’ market, paying over the listing price is extremely common. Reports show that when a home is priced to sell, buyers are spending between 1% to 3% over the listing price in order to win the bid.
Buyer’s pay over the listing price for many reasons, some being:
- They’re in love with the home. It has everything they want and it’s in the perfect location.
- They know it’s a hot property to own.
- They believe they’re getting a deal and can sell for more.
- There are cash bids.
There is no set amount on how much you should offer. In general, buyers will offer a few thousand more than the current offer or bid. It’s best to consult with a real estate agent or lender before making financial decisions that impact mortgage payments.
For an estimate, use our mortgage calculator to see if you can afford a higher bid.
When Should You Bid Under the Listing Price?
Offering below the listing price is risky. If you lowball the sellers, they’ll cut you from the table completely.
Determining whether to bid under the listing price depends a lot on if you’re in a buyer’s or a seller’s market. In a buyer’s market, it’s normal to submit an offer 10% under the asking price.
If it’s a seller’s market, the only time to offer below the listing price (and potentially get what you’re asking) is if the house is overpriced compared to the local area. If the appraised value is lower than the listing price, buyers can try to counteroffer with the appraisal, but in a hot market even that price gets knocked off the table.
When Should You Bid the Listing Price?
Negotiation is part of the real estate game. However, there are times when a home is listed at a fair price and buyer’s feel they should bid the listing price. Depending on the selling party and their goal and reasons for selling, offering the listing price can work to your advantage. Some sellers don’t want to negotiate and want a clean sales process.
There are also times and areas where the competition for housing is moderate, and the sellers are motivated to sell. As a buyer, you could also exceed qualifications – which is sometimes more attractive than a slightly higher bid.
How Much You Should Bid in the Current Real Estate Market?
There’s no denying that 2021 is a sellers’ market, and that greatly impacts how much buyers should bid on a home. In today’s hot market, homes are selling for 5% to 10% over listing price.
Real estate is selling fast, and if you find a home badly enough then you must be willing to put in an offer that you can afford and that the seller can’t refuse. While that isn’t always possible, there are a few things you can do to make yourself stand out from the competition.
Get pre approved, ensure you’re in good financial standing, work with an agent who is on top of their game and ready to negotiate, and know your limits. Remember, the listing price is just one expense of the homebuying process.