Once you find the right home to purchase, you have a big decision to make. How much do you bid? You know the asking price or the amount the seller wants to get for the home, but do you have to bid that much? When is it okay to bid less or when should you feel pressured to bid more?
Keep reading to find out the answers to the most pressing questions when putting a bid on a home.
What are the Other Homes in the Area Selling For?
This is one answer you need right away. Before you make a bid, find out how the other homes in the area are doing. Are they getting the full asking price? Is their full asking price around the same as what the seller of your potential home wants? This should play a large role in your bid.
The reason the prices of other homes is so important is because that is what your lender will base your loan on when it’s time for underwriting. The lender needs to know that the home is worth at least as much as your bid. The appraiser determines the fair market value of the home by looking at the recent sale prices of comparable homes in the area. Knowing what the comparable homes sold for can help you know where to start your bid.
How Busy is the Market?
Another big factor is the state of the market. Is it busy? In other words, are there a lot of interested buyers or is it slow? If there is a lot of competition in the market, you may want to beef up your bid. If sellers know that there are others knocking on their door to buy the home, the seller probably won’t settle for the lowest bid. They tend to take the higher bids that they receive as long as the other factors in the contract meet their needs.
If you happen to look for a home in a ‘buyer’s market’ or in a slow market, you have the upper hand. Of course, the seller still has the final say regarding which bid they accept, but they may be more willing to negotiate in a slower market.
Figure Out What Else You Need
Your bid isn’t just about the amount of money that you bid. This, of course, is a big part of it, but it’s not the entire puzzle. Sellers also care about what else you put in the contract. For example:
- How soon can you close on the home?
- What appliances are you requesting to stay in the home?
- Do you need the window treatments to stay?
- Do you have the flexibility to rent the home back to the seller should they need it?
These are just a few of the things sellers have to concern themselves with, especially if they are building their own home. The closing date is a big piece of the puzzle, but so are the other factors.
Sellers also want to know what you bring to the table. In other words:
- How much will you put down on the home?
- How much earnest money will you put on the home?
- What type of financing are you getting?
- Do you have a pre-approval?
Sellers want to know that you have financing with a solid approval. They also like it when buyers put a sizable amount of money down on the home and/or as earnest money. This helps them see that you are a serious buyer that has a good chance of securing the loan necessary to purchase the home.
The more positive factors you can give a lender, the higher your chances of winning the bid on the home.
Let Your Real Estate Agent Help
Your real estate agent is a powerful resource when buying a home. Not only can he/she show you the best properties that suit your needs, but he/she can help you place a bid on the home. Your real estate agent can’t tell you how much to bid on the home, but he/she can guide you along and place the bid(s) for you.
This takes the stress off you as you wait to hear from the seller and possibly counter the offer that they send back to you. Your real estate agent acts as the neutral third-party in the process.
So how much should you bid on a home? It depends on the circumstances. Look at the big picture to figure out where you stand and what the seller may want. The worst-case scenario is that the seller denies your bid, but that may just mean that the home wasn’t meant to be. There are plenty of other fish in the sea, giving you another chance to bid on a home.