Making Offers Above or Below Asking Price

When making offers at this time is it wise to make offers below asking price or above to make sure you get it?

2 Answers

If there is financing involved, the appraisal is king.  Offers above a listed price are *likely *to bring extra scrutiny by both the appraiser and the underwriter.  That is not to say that it is never possible to pay above the sale price, but you may be faced with some choices. 

For example, a home listed for sale at $200,000 is contracted at $210,000.  A lender may be skeptical and base any financing on the lower of the listed price or appraised value.  The translation here is that the extra $10,000 in this example may need to be additional 'down payment' paid by the buyer and verified as available through asset account statements. 

An appraisal that comes in under the sale price [whether or not that price exceeds the list price] may provide an opportunity to re-negoitate with the seller anyway.  A short sale, of course, would complicate matters in terms of the length of time needed to formally accept the offer.

Using a Buyer Agent as your Realtor may be the best course of action here.  The agent will work for you and give you the best advice without compromising anything you say.  By that I mean, if the Realtor represents the seller [and that is the case UNLESS you have a singed buyer agency agreement], he or she is LEGALLY OBLIGATED to disclose anything to the seller.  This includes conversations such as "We will start at this price, but will go as high as that price".  In many markets, supply exceeds demand, and it is Economics 101 that prices benefit buyers in those circumstances.  But, real estate and mortgage lending are two areas where there are no absolutes.  You know what your have the resources to do, and the key is to not exceed your ability to support a home purchase and mortgage amount.

This question can only be answered one neighborhood, city, one property at a time. Factors to consider:

  • How long has it been on the market?

  • How is it priced in comparison to other homes like it?

  • Is there something "wrong" with it that is making other buyers stay away?

  • Is it especially attractive or rare for some reason (for instance, waterfront or historic)?

The best way to strategize an offer price is to work with an EXPERIENCED real estate buyer's agent in your area. He or she will have great insider knowledge as to what is "flying" in your market on certain properties and what is not. There is really no substitute for this volume of knowledge. If you go it alone, however . . . try to find a listing history on all comparable properties. How long did they stay on the market? How much did they have to drop the price before a sale occured?

One last thing to consider: Are you going to be devastated if you get out bid and do not have the opportunity to counter offer? Is this property worth losing over a few thousand? Decide accordingly . . .