Buying a home takes a lot more work than you might initially think. After all, there is a lot more to it than just selecting the right home! Touring homes and narrowing down the list is only one half of the process. Once you have a shortlist of houses, you still have to make an offer and ultimately close the deal.
This part of the process is often much more stressful for homebuyers, as it requires a lot of preparation and prep work. Making a good offer requires a thorough assessment of the local housing market and its current environment. This is why working with a realtor is crucial, as they work through these specific things each and every day.
Whether or not you choose to work with a realtor, it is important that you understand some of the market mechanisms that determine whether or not you should offer above, below, or right on the asking price. This post will give a brief overview of scenarios where each type of offer may be your best bet.
What Is an Asking Price?
The Asking Price on a home is the minimum amount that a seller hopes to sell their property for. In most cases, the seller expects to receive at least the asking price in any sale. However, as will be explained later, this may not always be the case.
How Is an Asking Price Determined?
Sellers work with their realtors to determine what the asking price should be. There are many factors that go into the calculation of the asking price, including the seller’s goals, the trends within the local housing market, and the current interest rates that largely influence demand. Figuring out an asking price is almost a science, as sellers are careful not to undersell their property value while also setting the asking price within reason for buyers.
When to Offer Right on the Asking Price
In most cases, it is best to offer right around the asking price. After all, it is the amount of money that the seller is hoping to get in return for selling their home, and it is likely the amount that their realtor advised them to list it for. Most listing prices aren’t just arbitrary amounts that sellers hope to sell for! While it is not always the case, the listing price is likely the fair price to pay for a home during an average time in the market.
Different events going on in the local housing market and broader economy can influence this, as will be described later. However, it is usually a safe bet to offer and expect to pay right on the asking price.
If you are considering multiple houses, this is especially true. Unless you have pinned your search down to one home and are afraid that it could slip away from your grasp, your realtor will likely encourage you to submit an offer that is right around the asking price.
When to Offer Above the Asking Price
There are a few times when offering above the asking price might be fruitful. Firstly, if the local housing market is currently favoring sellers, you may need to offer above the asking price to even compete with the other buyers. This was very noticeable during the Covid-19 pandemic when houses were selling in a matter of days for far above the asking price.
Buyers were waiving all kinds of rights and submitting crazy cash offers, as there was simply no chance of submitting a winning offer without doing so. Generally speaking, this would not have been a good time to be a homebuyer, as the sellers certainly held all of the power. However, for those who really needed to purchase a house within a limited timeframe, the best bet was to submit an offer above the asking price.
The other common scenario that might warrant offering above the asking price is if a home is simply too good to miss out on. If you are worried that another buyer could swoop in and steal your dream home away from you, a good option is to bet a couple of percentage points above the asking price. This almost automatically makes you win out over any other buyers that just offer the asking price, almost guaranteeing that your offer will be selected in a normal market.
When to Offer Below the Asking Price
There is only one real time to offer below the asking price, and that is when the power shifts into the buyers’ hands. This dynamic is called a buyer’s market, and it exists when supply is high and demand is low. When there are too many houses and not enough buyers, sellers have a really hard time finding any takers on their homes. This is often an optimal time for buyers to step in and find desperate sellers who are in need of a quick sale.
This approach is especially effective if you are not in a time crunch as a buyer. If you are able to sit back and wait for a seller to accept a lowball offer, you may be able to get a house at a steal of a price. However, it is worth noting that the market is currently not especially favorable to buyers, and this tactic is not likely to be very successful in the short term.
Final Thoughts on Making an Offer on a Home
Making an offer on a home is a really big deal, as it is one of the final steps before finalizing the sale. Naturally, it is important that you work with a qualified realtor to help this part of the process move along smoothly. Offering the right amount on a home is really important, as a bad offer can either cause you to overpay on a house or miss out on it entirely.
In the vast majority of cases, you will likely offer somewhere very close to the seller’s asking price. This is because asking prices are formulated very carefully by sellers and realtors, and in a normal market, sellers will expect to receive at least the asking price in any sale.
However, as outlined above, there are a few circumstances where offering below or above the asking price may be advantageous to a buyer. Most homebuyers, especially those looking to buy a home for the first time, are not familiar enough with the market dynamics to make this assessment accurately by themselves.
Thanks for reading our post on making an accurate offer on a home! While this post is not detailed enough to help you make an offer yourself, it is certainly helpful in helping you to understand which situations warrant offers above and below the asking price. Again, most situations will warrant you offering somewhere right around the asking price, but this is always best determined by the realtor with whom you are working! Every situation is different, as it depends largely on both the local housing market as well as trends in the broader economy. As always, we are not liable for any ramifications of financial decisions that are made as a result of the advice in this post.
If you visit Myrtle Beach or any other place in South Carolina and fall in love, we’re here to help. We at The Boyd Team are committed to helping you find the right property for your needs and dreams. Any question that you have about moving to the area and finding your dream home by the beach is our pleasure to answer. Feel free to send us an email at eddie@boydteam.com or text or call us at (843) 222-8566, and we will get back to you as soon as we can. Being true natives of the Grand Strand and Horry County and with over 25 years of experience in the local real estate market, whether buying or selling, we can help you make your dreams a reality.
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