Once you’ve found a house in Las Vegas you love, you face the next big challenge for any homebuyer–making an offer. In a hot seller’s market, you can expect multiple offers.
If you really want the house, and you have been provided with the market data on the home value, you might offer over asking price.
Some buyers will even offer to pay cash over the difference in the appraisal amount and the purchase price.
In 2020, homes are literally gone within hours. A buyer must move fast and put their best foot forward when making their offer.
Many buyers see this stage of the process as an opportunity to negotiate and secure the home for a lower price than what the seller is asking. On the other side of the spectrum, however, there are occasional situations in which it’s clear that a home has a lot of interest, and you may need to pay above the list price if you want your offer to be competitive.
In this circumstance, it can be hard to know what to do or who to trust. Here are some tips for figuring out when you should bid above the asking price for a home.
Trust Your Realtor®
Some buyers feel wary when their Las Vegas real estate agent suggests that they should put in an offer above asking price. After all, if the home sells for more money, the realtor makes a higher commission, so isn’t it in their best interest to get you to pay as much as possible?
In reality, most agents won’t risk their reputations in order to make a little extra cash off your deal. Real estate, above almost any other profession, relies so heavily on referrals, and your realtor values your business. It’s very rare for an agent to take the unethical path and recommend you pay a higher price than your home is worth, so you should feel comfortable trusting your realtor most of the time.
Step Back and Consider
Sometimes, overzealous buyers will let their emotions rule when they find a house they love. Before you barrel forward and end up paying more for a house than you can actually afford, you need to take the time to step back and consider whether the property is actually worth that much. Even if you are worried you might lose the house if you don’t bid above the asking price, it might be a better option than paying too much simply because you have formed an attachment to the home.
Sometimes, your real estate agent will show you a home for which the list price seems too good to be true. In that case, you can almost be sure that the sellers are trying to position the home so it receives multiple offers.
In a multiple-offer situation, sellers have the opportunity to set a certain period of time (often a few days) during which they will field as many offers as possible.
The seller will then take some time to review the offers and choose the most appealing one. If you find yourself bidding on a home in this situation, it’s extremely likely that one or more of the competing offers will exceed the asking price.
In that case, you need to decide what you are comfortable paying for the home, and come in with your best offer if you want to have any chance at getting the house.
One technique that is often used by buyers in multiple-offer situations is known as the escalation clause. Say you are bidding on a house that is listed at $350,000, and you know that there are going to be multiple offers. You might place your bid at $350,000 but write into the offer that you are actually willing to pay $1,000 more than any other offer they receive, up to a certain threshold ($370,000, perhaps).
In this situation, you will likely end up paying above the asking price, but you will only go over that price by the amount necessary in order to secure the home.
Some agents advise their sellers not to accept escalation clauses.
The Appraisal Problem
Even if you do end up bidding above the asking price and have your offer accepted, you aren’t out of the woods quite yet. The next hurdle you will face is making sure that the bank is willing to issue you a loan for the amount you have agreed to pay.
Your lender will probably require an appraisal to prove that the home is worth the amount of the loan, and if the home doesn’t appraise for a high enough value, they may not grant you a mortgage. If your lender won’t cover the full purchase price, then you can still proceed with the sale, but you will be responsible for paying the difference out of pocket.
In the end, like so many home-buying decisions, your choice about whether or not to bid above the asking price will be personal and subjective.
As long as you can justify the cost, afford the mortgage, and pay any extra money not covered by your bank, then it’s up to you how far you will go to secure the home of your dreams.