Bid Over Ask: How it Can Help You Get Your Dream Home
It’s getting hotter every day. As the temperatures creep up, so does everything else it seems. As home prices, inflation, and what we pay for a tank of gas push the needle into the red, the housing market remains on fire for sellers. What this usually means for buyers is that they are entering the market from 0-to-75mph and time is of the essence when making an offer on a home. With limited inventory and so many people clamoring for the houses available, the offer price on your paperwork can make all the difference. This is the reason tactics like Bid Over Ask are so prominent right now.
There are lots of fancy moves that can get you noticed when making an offer. Walking in with great credit, a juicy down payment, or a cash offer are certainly some attention grabbers. But when a listing agent and seller are reviewing 20…30…even 40 offers on the same property, it may seem natural to want to go big in order to go home. We’re talking about Bid Over Ask, also referred to as bidding over the asking price…that bold and specific move that has you giving more in a sea of people offering only what was asked for.
But is it the right move? With so much on the line and the clock ticking, you need to be confident that it is what you want to do. Let’s examine some things to think about when it comes to this tricky and polarizing move.
How Much Can I Even Afford?
How are you going to know what your flashy top offer should be, if you don’t even know what you can realistically afford to begin with? It may seem like a silly and obvious question, but it is important. It sets the foundation. Know what your baseline is and understand what your realistic cap is. If your highest offer is below what market value is, Bid Over Ask is not really for you.
Do You Know What You’re Up Against?
A good buying agent is going to have conversations with the listing agent. They represent you and want to tell you what you’re up against. Knowing what your competition is doing will help you craft an attention-grabbing offer. Therefore, it’s imperative to know if you’re up against all-cash offers before you employ the Bid Over Ask tactic. All-cash offers are always going to be your biggest adversary. There are some very interesting reports out now that show a staggering 41% of listing agents stating this to be the most impactful of moves. If you are up against cash offers, the action of offering above a seller’s asking price could be a clever slide. It could sway the seller away from the ease of a cash transaction and shift the focus to you as a prospective buyer.
What’s the Market Value?
This is a big one to think about! Firstly, pricing a home lower than its value can be a tactic of many selling agents. Its appealing price point in a market of higher priced options will likely create a flurry of activity in the form of offers. A frenzy of interest can create all sorts of financial gymnastics from prospective buyers in order to get noticed. It also increases the chances of pushing up that final selling home price. It could be a good move to offer over asking because the offer will likely be in line with the true value of the home.
On the flip side, some people may be playing the numbers and taking into consideration the increasing market value of homes every year. They think if they offer over ask, they are making a strong investment
because their home will just keep increasing in value year over year due to the current tide. They assume that they’ll make up the overage in just a few years because the trend has told them so. It’s a false sense of security. As we know…what goes up must come down. When the balance shifts again, these buyers may find themselves upside down in value vs investment and monthly mortgage payments.
This is where your buying agent is going to be so valuable to you. Not only will they pull comps to advise you what the true value of homes are in your desired neighborhood; but they will also have some knowledge of how to navigate the current market. Based on these factors, you will gain more insight on whether Bid Over Ask makes sense for the home of your dreams.
Is This The One?
When you find The One, you just know. You’ll imagine the dinner parties and BBQs. You’ll know where you’ll place your bookshelf and your favorite turquoise blue china cabinet. You can picture where you’ll display your holiday decorations and make memories. The serious question you need to ask yourself when you’re about to put an offer in on a house…would you be devastated if you lost this home? If the answer is NO, then it may make the most sense to simply make an offer on the value of the property. If the answer is an unequivocal YES, then you need to do whatever you can to stand out in the offer crowd. Don’t let something special slip between your fingers. You don’t want to be driving by the place you lost, thinking about the fact that someone else is living in your home!
Can You Mind the Gap When You Bid Over Ask?
Lastly…it’s important to remember at the end of the day, the house is going to appraise for a certain value. And that appraisal value is going to dictate what a lender is going to offer you for a loan. New buyers – especially those looking to employ the slick Bid Over Ask move – are going to need to have a plan on how to manage the gap between appraisal and higher offer. In most cases, you’ll be paying the difference. Are you going to be able to handle that difference?
The long and the short of it: it’s a hot market. If you’re entering the game now, you need to be ready to move at light speed and get yourself noticed when you see something you want. Having a solid realtor to help guide you through a volatile market is key to getting your own set of keys to your new home. Understanding how much you’re willing to offer over asking price – if anything – may be the difference between another lease or your own mortgage.
To hear more about how we work with customers who have made the decision on what they want to offer for a home, give us a call today.