Is bidding over asking price the right strategy for you?
Hunting for your new home can be exciting and exhausting. You get to explore the available homes out there and decide which one you want to make memories in. However, if you feel like you’ve exhausted all your options and keep getting outbid by other offers, you might think waiting is your best strategy. BUT DON’T GIVE UP YET!
In today’s market, it might make more financial sense to pay over asking price now instead of having to face more competition and higher prices later. So before you pump the brakes on buying your new home, check out why waiting might not be the smarter move.
Buying now may gain you equity later
Because of today’s market and the looming possibility of increased competition, you may be better off buying your home now so you can gain some equity to make up for having to put in a higher offer.
The market is hot
Believe it or not, about ⅓ of homes are sold above asking price, and each home has an average of three offers. Given the current market, if you hesitate to put in a competitive offer now, you might miss out on the home you want.
More competition may be coming
As the market continues to heat up, you may face more competition in the coming years if you choose to wait on buying a home. Rates are still expected to drop, and if they do, more people will be looking to buy a home. Plus, with low inventory expected to continue, those people will be bidding on the same homes which will raise the price even more. With these larger offers, you may be forced to pay even more than you would have if you bought a home now. By taking advantage of the current market, you can potentially avoid missing out on your dream home.
You could gain equity quickly
Home values have continued to rise and are expected to appreciate 7% in 2024, which means that if you choose to buy now, there’s a good chance you'll start gaining equity very quickly. That equity can help make up the difference you might spend bidding over asking. If you wait until next year to buy, home appreciation will actually work against you because home costs will continue to rise.
Let’s look at how much equity you could gain by buying now
Let’s say after going to a bunch of open houses, you find THE ONE and it’s listed for 500K. So you submit a bid and it’s accepted at $525,000. If your home appreciates at 7% in 2024 that would mean your home would have a new value of $535,000. Then, if you stay in this home for 5 years at a conservative 3.5% appreciation, your home value would become $613,924.
If you were to buy this home now, bid 5% over the asking price and your home appreciates 7% as expected, you would then come out ahead in a year or less. With this scenario you actually gain nearly $89,000 in equity from your original bid. So that extra money you spent getting your home, is outweighed by the equity you gain.
Are you ready to make a move?
If you’re ready to beat the competition and see how you can put in a strong offer today, reach out to a Movement loan officer near you to get started!