In today’s competitive real estate market, finding a home can be difficult, and getting a bid accepted on a house can be even harder. Bidding wars are back, and knowing how to navigate competitive bids is very important.
Understanding Supply and Demand
Supply and demand is an economic theory that simply means when you have a large supply of something, prices for that thing decline. If a supply of something like homes in a particular market decline, prices of homes can increase.
When thinking about supply and demand related to the housing market, location also factors in. A house that could be worth $250,000 in one location may only sell for $175,000 in a different neighborhood. If homes in the location you’re interested in are in low supply, it might be worth it to place a bid higher than the asking price.
“How Much Should I Bid on a Home?”
Figure out what the home is worth to you, independent of the asking price. Determining the right bid is more of an art than an exact science, and if you’re working with a realtor, you should work together to come up with the best strategy.
Here are some things to consider when placing a bid:
- Look at comparable properties (comps) – Make sure the asking price is fair by looking at houses on the same block, preferably the same size and with the same amount of bedrooms and bathrooms. Using these home buying resources will give you a baseline estimate of what your potential home should be worth.
- Sold price vs. list price – Look at the houses in the neighborhood that have sold recently. Have they sold above or below the asking price? This will give you a good idea of what sellers are expecting. Be sure to look in the same market. The home that sold for more than the asking price last year may not be able to get the same price today.
- Timing and price history – How long has the home been on the market? If it was recently listed the seller may not be as likely to take a lower offer. If you really love the house, you may want to consider making a higher offer. If it’s been on the market for several months and the price has dropped, you may be able to make them an offer lower than the list price.
Now that you know what to consider before you make a bid, how much should you bid? In a competitive market, you need to put your best offer forward right away because you may not get a second chance. Work with your real estate agent or use the information you’ve collected to determine what amount would be competitive, while keeping in mind how much house you can afford and you’ll be in a good position to nab the home of your dreams!
Have you successfully won a bidding war? Got any tips to share? Leave your thoughts in the comments!