Offer $20k more than asking price?

Question

My cousins are looking for their first home They saw a home they really like. It's 3bd 2 1/2 bath 1770 sqft built 1975 and the seller asking price is $480K. We talked with the seller agent they said there are 2 offers already but they have not reviewed yet.

My cousin has couple days to decide and submit offer. They are afraid they would lose the deal, so they want to offer $500K which is $20k more than asking price.

I want to ask your expertise opinion. Should my cousins over offer $20k for this home? The comps average is the area is around $440K.

Bill B. · Answer

It’s 20% down on the value the bank will loan. So if it appraises for $500k, they just need the $100k down. If it appraises for the asking price, $480k, they need 20% of $480k plus their $20k over, about $116k. If it appraises for “what houses are going for” $440k, they’ll need $88k plus $60k, or $148k down.

Don’t forget to add inspections, title insurance, escrows, closing costs, etc, things that will pry add another $5-$10k when they’re trying to squeak their cash up to these levels.

Jake Mires · Answer

@Katie Huynh there are a few different factors. A house is only worth what a buyer is willing to pay for it. If it’s listed for $480K and it would be personally worth it for your buyers to pay $500K then yes, offer $20K over.

For instance, a piece of land with an oil well underneath it is worth probably $1,000 to me. Because I don’t know anything about oil and don’t care to learn anything. To an oil miner, it’s worth $1,000,000. Same piece of land, different people.

As long as the buyers think it’s worth it to them to have it $20K over the current asking price, then go for it. Depending on down payment, if it appraises for $440K and they paid $500K, make sure they have at least 60K cash to put into the deal, I’ve seen many times people offer over asking price and don’t have the cash to cover the delta between the purchase price and appraisal (because a lender will only lend based on the appraised value).

20K over ask on a $480K home is like a 4% increase. Where I am, we are offering 20K over on a $300K home and losing left and right, just for perspective

Any more questions, please ask!

Katie Huynh · Answer

Thank you for your information!