The housing market currently has an excess of potential home buyers without the inventory to meet that demand. That means home sellers hold the advantage of creating bidding wars for a property that has multiple bidders. It’s why you see a large number of successful home bids come in over the initial asking price. However, before you blindly start throwing thousands of dollars over the asking price to secure your winning bid, there are some crucial factors that you should consider first.
Don’t Overvalue the House
How much you put up for the over-asking price offer on the property you’re targeting can have unintended long-term consequences on your time in the house. One such consequence comes when you try to secure a home loan to close the deal. The lender’s appraiser does not take what you paid for the home; they’re only appraising the home’s actual value. Let’s say you’re looking at a $430,000 home and decide to put $450,000 down on it to help secure the bid. However, an appraiser comes in and values the home at $440,000; the bank will only approve the loan for $440,000. The $10,000 difference will need to be covered by you, on top of whatever you paid in the down payment.
Taking the time to properly evaluate the house, accounting for how much you’re willing to go above the asking price without compromising your savings or potential renovations budget, will help counter any danger of overdoing it and going too far over the asking price.
Expect Stiff Competition
While you shouldn’t overvalue a property, you should still be ready to offer above the asking price if you want a particular property. With the current seller’s market, the amount of people looking to buy a home dramatically exceeds the current supply. This influx of home buyers leads to realtors fielding a flurry of highly competitive bids on a single property and trying to find the one that sticks out the most. Most homebuyers should bake going over the asking price into their housing budget. Typically, prospective home buyers should be ready to offer between roughly 1-3% over the initial asking price to stand out from the competing bids.
Have a Maximum Budget Set
No matter if you are buying a vacation home or your next long-term main home, you want to have a set maximum budget in mind. This number will help guide you to homes that fall within your means and help you avoid falling into potential money traps that will affect your financial future. Operating within this budget will help you find a property that meets your needs and won’t break your carefully constructed savings and repair funds.
Are you looking for Lake Tahoe homes for sale but don’t know where to begin setting your budget? The Luna Lending team can help you figure out your next steps and establish a plan of attack to get your dream home. Contact us today to get started!
AHL is an Equal Housing Opportunity Broker. NMLS: 17296528 DRE 02058505