When It's Okay To Offer Above List Price

February 16, 2024

Tim Clarke

Making competitive offers in hot housing markets takes strategy. Learn tips to strengthen your bid and avoid overpaying in bidding wars for your dream home

You’ve finally found a house you love. But buying it might not be easy. There could be lots of other buyers competing for it too. So you need to make an offer the seller will accept.

This is a big decision. You have two options: keep looking for a house with less competition, or compete for this home.

When It Makes Sense to Offer More Than Asking Price

In the past, buyers could often negotiate down the price. But sometimes offering more than the asking price is the best strategy. Here are situations when that extra money may be worth it:

You Know There's Competition

Research the Current Offers

Bidding wars often happen right after listing a house. But they can also pop up later for overlooked listings. Before making an offer, have your agent call the seller's agent. Ask if there are already offers submitted. Also find out if the seller wants any terms beyond the highest price.

Make Your Offer Stand Out

Once you confirm there is competition, make a strong offer. Include any terms you think would appeal to the seller. For example, waiving contingencies or covering closing costs.

One or More Competing Offers is Cash

Cash Offers Are Less Risky

If you need a mortgage, your offer depends on loan approval. For the seller, accepting a cash offer is much less risky. There's no chance of the financing falling through.

Cover Appraisal Gaps

To be competitive with cash offers, consider promising extra cash if the appraisal is low. This shows you're serious and could convince the seller to accept your financed offer.

You Really Love the House

Don't Let Emotions Make You Overpay

Buying a home involves emotions. If you find a house that feels just right, it’s tempting to overbid. But don’t let excitement cloud your judgment on the offer price.

Missing Out Will Be Devastating

That said, this isn’t the time to lowball. You’ll be crushed if another buyer gets it. And you’ll have to restart the exhausting search for a home you love as much.

The House Seems Underpriced

Underpricing Sparks Bidding Wars

Sometimes sellers purposely price a home low to generate a bidding war. If you find a great house below market value, you’re likely not the only interested buyer.

Expect Fierce Competition

Assume there will be competing offers. The seller may even wait several days to build up interest and drive up the price. Make your strongest offer right away before it’s too late.

The Seller Isn't Motivated

Assess the Seller's Mindset

Some sellers just want to test the market. They're in no rush to sell. Ask your agent to call the listing agent and gauge the seller's motivation.

Consider an Aggressive Offer

Check how many days the home has been listed. If it's been on the market longer than similar homes, the seller may be unrealistic or unwilling to negotiate. In this case, an aggressive above-ask offer could get their attention.

When that perfect home comes up, your initial offer could determine whether you get it. Having a great real estate agent is key too. They can help craft a competitive offer to beat out other buyers.

Final Thought from Tim

As a real estate agent with over 15 years of experience in the Triangle area of North Carolina, I've helped many buyers navigate competitive housing markets.

My top advice is to partner with a knowledgeable agent who can guide you through the process.

An expert agent has insights on market conditions, experience with bidding wars, and negotiation strategies to help your offer stand out.

At the Tim M. Clarke Team, our goal is to provide exceptional service so you have an enjoyable home buying experience.

We take time to understand your needs and priorities. We provide objective information to help you make informed decisions in challenging situations.

And we leverage our local expertise and industry connections to gain a competitive edge.

Buying a home is a big investment - both financially and emotionally. Having an agent you trust by your side provides peace of mind.

We work hard to earn that trust through transparent communication, skillful negotiations, and dedication to your best interests.

Don't go it alone. Partner with a proven agent who will expertly represent your interests so you can focus on finding your perfect home.

FAQ

How do I know if I'm in a competitive housing market?

Signs include low inventory, homes selling fast, and listings receiving multiple offers. Your agent can provide insights on market competition.

What can make my offer more appealing to sellers?

Offering over list price, submitting a pre-approval letter, providing a large earnest money deposit, waiving contingencies like financing/inspection, and covering closing costs.

Should I waive the home inspection contingency?

This makes an offer more competitive but is risky if issues arise. Consider a shorter inspection period instead of fully waiving.

What if my offer gets rejected despite being the highest?

Sellers weigh factors beyond price like closing timeline, down payment, and letter about yourself. Work with your agent to emphasize strengths of your offer.

What if the appraisal comes in lower than my offer price?

Be prepared to cover an appraisal gap by offering to pay the difference in cash. This shows you are serious.

How do I make my offer stand out in a bidding war?

Quick response time, personalized letter to seller, flexibility on move-in date, and limiting contingencies help. A higher due diligence fee also signals you are serious.

What are escalation clauses in real estate offers?

This automatically increases your offer price to beat other bids up to a limit you specify. It keeps you competitive in a bidding war.

Should I waive the financing contingency if I need a mortgage?

No, this is too risky. Instead provide a pre-approval letter and try to secure a commitment letter from your lender.

What should I do if I lose out on multiple offer situations?

Don't get discouraged. Ask your agent for feedback to improve future offers. Consider adjusting criteria to increase options.

How can an agent help me navigate bidding wars?

Experienced agents provide objective guidance on competitive offers, negotiate strategically, and leverage relationships to create an advantage.

Tim M. Clarke

About the author

17 years as a Realtor in the Research Triangle, Tim seeks to transform the Raleigh-Durham real estate scene through a progressive, people-centered approach prioritizing trust & transparency.

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