This guide covers how high should homebuyers go over list price in a bidding war on a house. How high should homebuyers go over list price in a house bidding war? The housing market is booming. The U.S. has experienced a bullish housing market since 2012. Year after year, the housing market has been booming with no sign of a correction. Last February 2020, the coronavirus outbreak and pandemic hit the United States. The Dow Jones Industrial Average was nearing 30,000 and plummeted to 18,000. However, the Dow Jones Industrial Average is now at 34,000, less than two years after it bottomed at 18,000.
Many homebuyers were so confident there would be a housing market correction. Unfortunately, the housing market correction never happened despite experts predicting a housing correction similar to the 2008 real estate meltdown.
There are tens of thousands of homebuyers and real estate investors yet sitting on the sidelines and waiting for a housing market correction. Many homebuyers need to pay over the list price on homes currently on the market. Home sellers have been spoiled not to go below the list price. Is the new norm buying a home over list price? One of the most frequently asked questions is how high should homebuyers go over list price in a booming housing market.
Experts And Economists Predicted Housing Market Correction After Coronavirus Outbreak In February 2020
The housing market forecast seems there will be more demand for homes versus inventory. The coronavirus pandemic has triggered a stronger housing market versus initiating a housing market correction. The COVID-19 outbreak has made remote job opportunities the new normal for wage earners. Remote wage earners are fleeing city living and moving to rural areas and even out of state where they can find affordable housing and has a lower cost of living. The major exodus of city dwellers to the suburbs is one of the main reasons why homes are in major demand. Many renters are buying homes in the suburbs and rural areas. Homebuyers can get more houses for the money in the suburbs or rural areas.
Will There Be A Housing Bubble: Experts Baffled How Tight The Housing Market Is
This was when economists and real estate experts predicted a housing market correction. Will the housing market plummet? Will the housing market have a correction? NOPE. The coronavirus pandemic has spiked the unemployment rate to almost 10%. Millions of Americans were unemployed. The restaurant industry came to an abrupt halt. So did the hotel industry and travel industry.
Housing prices have skyrocketed to new levels. There was more demand for homes than inventory. Never in history has the housing market been so hot. Most homes were selling over list price. Today, home sellers expect home offers higher than the asking price. This article will discuss how high homebuyers should go over list prices in a bidding war.
How High Should Homebuyers Go Over List Price: Is Offering Over Asking Price The New Norm?
The housing market is hot. Gustan Cho Associates have hundreds of pre-approved homebuyers with loan commitments. These pre-approved home buyers are ready to pull the trigger on a home purchase. However, these solid pre-approved homebuyers are facing the same dilemma. There are no homes-to-place offers. Gustan Cho Associates is licensed in multiple states. The housing shortage is everywhere. The norm seems to be to offer higher than the list price. There is no doubt it is a seller’s market. At first, many homebuyers hesitated to buy a home over list price. However, buying homes over list price is becoming the new norm.
How High Should Homebuyers Go Over List Price: Depends On The Number Of Multiple Offers On New Home Listings
When a home goes on the market, dozens of potential buyers will flood their interests. Open houses are no longer necessary. Within days, home sellers will get dozens of purchase offers. Most of these offers will be higher than the list price. It is similar to purchasing a Ferrari or Lamborghini. Most exotic car buyers must pay over MSRP on a new Ferrari or Lamborghini due to the demand for these cars. It is not uncommon for an older used Ferrari to still sell over MSRP. Seller real estate agents are stressing over too many property offers. Homebuyers need to know the consequences of buying a home at a higher than the list price.
How High Should Homebuyers Go Over List Price: Be Aware Of The Consequences of Buying a Home That Will Not Appraise Out
The homebuyer must determine the difference between the purchase price and the loan amount. The lender will only lend the maximum loan to value from the appraised value and NOT the home purchase price. The previous norm was always to purchase a home below the list price. Real estate purchase transactions were always supposed to be negotiated. Paying over the list price is something new.
It has become the norm during the booming housing market. Many homebuyers are priced out of the market. Luckily, remote wage earners can and benefit from moving out of state. Many remote workers can move to a state where affordable home prices remain. The dilemma facing many homebuyers is how much over list price should they make an offer. It seems the norm is most people are paying over a 10% markup over the list price.
How Homebuyers Make Offers
Most seller real estate agents and home sellers will not accept a home purchase offer from a buyer unless the buyer has a solid pre-approval. The norm was always to make an offer lower than the list price of a home. There are other important factors when placing an offer besides the offer price. Today, we are in a seller’s housing market. A seller’s market is when there is a high demand for homes but little inventory. Sellers will get dozens, if not hundreds, of shoppers wanting to make an offer. The sellers control the podium. There are so many bidding wars during a seller’s market. Home sellers can pick and choose which contingencies to accept and refuse. Many homebuyers have shopped for homes for over a year to lose the winning bid. Paying over the list price is accepted by most homebuyers who have been shopping for homes. Many homebuyers accepted that they must purchase a home above the list price.
How High Should Homebuyers Go Over List Price And Things To Consider
One of the most important factors to consider when offering over the list price is the homebuyer’s need to realize lenders will require borrowers to determine the difference between the purchase price and appraised value. The lender will only lend a certain loan to value based on the appraised value and not the purchase price.
If the homebuyer purchases a home $40,000 over the appraised value, the buyer needs to cough up the whole $40,000 extra. The lender will only lend the loan to value based on the actual appraised value. Homebuyers need to check their finances to buy a home over list price.
The norm for most homebuyers is purchasing a home 10% over the list price. Will this norm continue? The bottom line is buying a home over list price is not a rip-off if you are buying an owner-occupant home. Real estate values will go up in time. The key is how long you plan to live in the subject property. You should be fine if you plan to live in your subject property for over five years. However, if you are planning on selling your home in less than three years, you may sustain a loss. Gustan Cho Associates will remind viewers how long this housing boom will last.
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