Bidding Above Asking Price: What You Need to Know

Buying a house is an exciting process, but in today’s housing market, it can also be challenging. Bidding above the asking price has become a common phenomenon. In this blog, we’ll explain what it means, when it happens, and what you should consider if you decide to place a bid higher than the asking price.

What Does Bidding Above Asking Price Mean?

Bidding above the asking price means making an offer that exceeds the listed price of the property. This often occurs in a tight housing market where demand outpaces supply, making buyers willing to pay more to secure their dream home.

Is Bidding Above Asking Price Still Common?

While bidding above asking price still happens, it is less frequent than in previous years. In 2022, 81% of homes were sold above the asking price, whereas in 2023, this percentage dropped to 31%. This means that bidding above asking price is not always necessary to purchase a house.

How Much Should You Bid Above Asking Price?

The amount you bid above asking price depends on factors such as the local housing market, the condition of the property, and your personal financial situation. It’s crucial to set a maximum budget for yourself in advance and stick to it, even in the heat of competition. Aim to bid below your maximum budget to leave room for negotiations. If the property exceeds your budget, consider looking for another home that better fits your financial situation.

Can You Finance the Overbid Amount Through Your Mortgage?

When bidding above asking price, it’s essential to understand that you can only borrow up to 100% of the property’s appraised value, not the asking price. If your bid exceeds the appraised value, you must cover the difference with your own funds. Ensure that you have this amount available before placing your bid. You can easily calculate the property’s value using online tools or by hiring an appraiser.

Contingencies When Bidding Above Asking Price

If your bid is accepted, it’s wise to include contingencies in the preliminary purchase agreement, such as financing and property inspection. These contingencies allow you to withdraw from the purchase without penalties if you’re unable to secure financing or if serious issues are discovered during the inspection.

Conclusion

Bidding above asking price can be an effective strategy to secure a property in a competitive market, but it also comes with risks. Be realistic about your financial capabilities, set clear boundaries, and don’t let emotions cloud your judgment. At KIJCK. Makelaars, we are here to guide and advise you throughout the buying process, so you can make well-informed decisions and purchase your new home with confidence.