Nicole Mazzola

858.775.0328
nicole@aare.org

1020 Prospect Street #350
La Jolla, CA 92037

When Should Buyers Offer Full Asking Price on a Listing?

January 11, 2018

It’s common practice for homebuyers to offer a price on a home that’s under the listing price in hopes of negotiating a number that both parties can agree on. By leaving a gap between the listing and offer prices, you’ve got some wiggle room to allow for a little back-and-forth bantering.

But when is it customary to offer the full listing price on a home? Why would any buyer willingly offer what the sellers want rather than try to get the place for cheaper?

Well, there are certainly cases that warrant full asking price right out of the gates. Depending on the current market in your area and your particular affinity for the home in question, it might make sense to offer the listing price to get the property you want.

Here are some reasons why offering full asking price may be warranted.

The Comps Say the Home is Listed According to Current Market Value

Perhaps the most important way to gauge whether or not to offer full asking price is to take a look at the “comps” in your area. Comps are short for “comparables” and are similar homes to the subject property that have sold in the recent past in the area you’re looking to buy in.

It’s important to look at what homes have sold for rather than what homes are currently listed at. Just because sellers are asking for a certain price does not mean they are going to necessarily get it. Instead, solds dictate what buyers are actually willing to pay for a home similar to the one you’re considering buying.

Comps essentially inform you of the current market value of the subject property. At no point should you ever put in an offer on a home without first having your real estate agent pull a report on recent comps and analyzing the final sales price of recently sold properties.

Ideally, the comparables that are pulled should have been sold in the recent past – usually no more than two or three months. The more recent, the better, especially in volatile markets that fluctuate from one day to the next. The comps should also be very similar in all aspects to the subject property, including size, type (ie. one-story versus two-story), lot size, exact location in the neighborhood, number of bedrooms and bathrooms, types of amenities, age, and condition.

If the comps show that sales prices for similar properties are very close to what the listing price of the subject property is, then offering full asking price may be the right move to make.

The Competition is Fierce

Check out how quickly homes in the area are selling for. If the average number of days on the market is at least 30 days or more, the market may be somewhat soft and you may have some leeway in terms of what price to offer.

On the other hand, if homes are selling within hours of hitting the market and are getting their full asking prices or higher, you know that buyers are waiting to pounce. In this case, the competition is fierce and you’ll have to put your best foot forward when making an offer on a home.

As a buyer, you absolutely need to be aware of the state of the competition in your area and what you’re up against. In many cases, offering over the listing price may be warranted, especially if bidding wars are rampant in the area you’re looking to buy in.

Your real estate agent will be able to more accurately assess what your competition is like before you submit an offer. These professionals will be able to find out what the sale-to-price ratio is, which basically tells you how much homes sell for relative to their listing prices.

This ratio is calculated by dividing the last listing price by the final sale price. Generally speaking, the higher this number is, the less competition there is as sale prices are under listing prices. On the other hand, lower numbers mean that homes are selling near, at, or even over the listing prices, which means competition is tough.

Your agent will also be able to tell you if there are any other offers on the same property that you want to buy. If other offers are coming in, yours should probably be as close to listing price as possible.

You’re Willing to Pay What the Seller is Asking

At the end of the day, the amount of money that you’re willing to spend on the home will have a heavy influence on how much to offer. Of course, you don’t want to spend any more than you have to or any more than what the market says the home is worth.

Your motivation to buy the home plays a key role in whether or not you offer full asking price. If you’ve fallen in love with the place and developed an emotional connection to it, there’s no reason not to offer what the sellers are asking if the market supports that number.

The Bottom Line

In many cases, offering less than what the sellers are asking can be a smart strategic move to allow for some room to negotiate on price and save a bundle of money. But in many other circumstances, offering full asking price – and sometimes even more – may be called for. Be sure to discuss your offer price with your real estate agent in detail before deciding on an offer price to maximize the odds of landing the home you want without paying any more than necessary.