On average, Americans only purchase three homes during their lifetime. That limited experience can make it difficult for the homebuying public to know what price to propose to the seller to make sure that their offer is accepted and they are able to move into their dream home. In some markets, you can offer much less than the asking price and still be successful; in other markets, you may need to offer more money than the seller is asking to avoid a bidding war with other prospective buyers. It can be confusing to know if you’re really getting a good price when homebuying.
Home Price Factors
One good place to start is to understand the many factors that go into determining the market price for a home. These include:
- Supply – Home prices tend to go higher when there are fewer properties on the market. This is the number one factor in setting homebuying prices. A good measure of whether your area is experiencing a short supply of homes is the time that the average property stays on the market. In a seller’s market, houses come off of the market in a matter of a few days. In a buyer’s market, the average time it takes to sell a home can be several weeks.
- Location – The location of a home is still a prime determinant of how much you should pay for the property. A home located near good schools and other valuable homes will always be worth more than a similar home in a “bad” neighborhood.
- Historic pricing and comps – The previous selling price of the home and what other, similar homes have recently sold for in the same neighborhood are also prime factors in determining what you should pay for a house.
When To Offer More Than Asking Price
Inventory is currently low throughout the country and this is not expected to improve anytime soon, according to reports from the National Association of Realtors. In fact, existing home sales in December, 2020 were the highest they have been since 2006.
Our current inventory shortage existed before the pandemic, and demand has become greater with more people seeking to move out of the more densely populated areas and working remotely. This supply shortage has led to our current seller’s market and increasing home prices. In a seller’s market, when there are fewer homes on the market than there are buyers, homes tend to sell quickly and for more money than the asking price. It’s not unusual for there to be several people interested in the same property. In this type of market, it’s a good idea to offer more than the asking price to ensure your offer is accepted. Homebuying can be a little tricky in this type of market, since properties tend to move quickly.
When You Can Offer Less Than Asking Price
In a buyer’s market, when there are lots of homes on the market, you can often find good deals on real estate and rarely do you have to pay the full asking price for a property. However, you want to be careful to not insult the seller and have him or her reject your offer without making a counter-offer. Most real estate agents consider asking 10 percent below asking price in a buyer’s market to be a good starting point.
Get An Agent’s Help
A good real estate agent can help you make sense of the ins and outs of homebuying and what price makes sense to offer to be able to “seal the deal”.
Additional Homebuying Resources
Get prepared for your home purchase with these additional articles!