Most home buyers go into the process thinking about negotiating a lower price on a home. They hope they can talk the homeowner down a few thousand dollars to keep their mortgage payments low or to simply have extra money for renovations. However, there are many times where making an offer over the asking price is better.
While it may feel a bit painful to over-offer on a house, here are seven instances where it is the only choice.
In a seller’s market, the buyer has very little power. They may not have the ability to negotiate and their first offer is likely their final offer. A seller’s market is one in which there are fewer homes for sale than there are buyers seeking new properties. With more competition buyers are pitted against each other to gain the attention of the homeowner.
To know if the market is a seller’s market pay attention to how long homes are on the market. If they are selling in less than two weeks it is likely a seller’s market. Consider the asking price versus selling price, as well. If houses consistently sell over their asking price it is time to put in offers over the asking price.
Real estate agents and homeowners want to share if there is interest in a home. Having multiple interested parties usually puts a fire under the other buyers. Buyers who do not want to lose out on a house will make higher offers quickly if they want to compete against other buyers. Knowing if there is competition for the property is important before wildly putting in an offer.
Some homeowners price more than competitively with the other houses in the area. They may be motivated to sell or simply know they are going to spark a bidding war on the property.
A house that is priced well under what it is worth is going to gain a lot of attention. Some buyers may make an offer for what the homeowner is asking. However, the buyer who offers more on the first offer is going to gain their attention.
A home buyer who is relying on a mortgage to purchase a house is at a disadvantage compared to one that is able to make a cash offer. With a cash offer, the homeowner knows that the buyer can deliver on payment and they do not have to wait for a loan to process.
If working against someone who is making a cash offer, which is typically less than asking price, make an offer for over the listing price. This will help alleviate the upper hand that the cash buyer has.
Homeowners sometimes try to learn what they can get for their house by placing it on the market and then pulling it without making a sale. They simply want to see what offers they could receive if they decided to sell. While a non-committed seller is not an easy one to work with if the house checks all the right boxes a buyer could make an offer the homeowner cannot refuse.
There are some purchases where the buyer is perfectly happy with the house, even though it needs some work. Sometimes it is not even a big deal if the buyer loses out to another buyer.
However, for the instances where the home buyer will always think of the one that got away, they should consider making an offer over the listed price.
Never make an offer that is going to overshoot the value of the home. If obtaining a mortgage for the sale the lender will not approve an amount over the appraised value of the house. Either the home buyer will have to pay the difference out of pocket or they risk needing to back out of the sale.
Be careful not to over-pay if the home is not worth it. In a case where the house will appraise well over what is being asked it is reasonable to offer more.
Choosing what to offer on a house is not an easy task. When the market favors the sellers and there are buyers flocking to make offers the process is even harder. No buyer wants to make an offer for more than what the homeowner is asking. However, it can sometimes be the one thing that makes the homeowner take notice and accept.