Making a Questionable Offer

[Mark Abbate]

Hi All,

Myself and a friend of mine are going in on a first house together, that we eventually would like to be a rental. We found a suitable property that we would like to put an offer in on. Our Real Estate agent let us know that in the current market (Location, price, amenities, etc.) that we should offer $30k over list price. 

The property popped up on a few listing services about a week ago for $499k and went live as of Saturday 1/30. So far it has over 1,000 views on Zillow and almost 100 saves. She also let us know that there are already at least 2 offers on it and they are reviewing offers today, 2/1. 

She said that a lot of places are being swooped up fast and it is true having been searching for almost 2 months now. My question is, it normal to make an offer that much higher than list to try and secure the property?

I'm looking forward to your responses!

[Will Fraser]

Hi @Mark Abbate, yes it's completely normal.  Or no, it's batsh** crazy.  The sanity of offering $30k over COMPLETELY depends on how the home was priced.

• If someone has overpriced the home $100k and it is truly a $400k home, then this would be lunacy.  The market will demonstrate this lunacy by rejecting the home at this price.
• If someone underpriced the home and it is really worth $600k, then $530k would be a STEAL!  The market will demonstrate this through pulling in multiple offers and driving the price northward.
• If someone priced it "on the money" as a savvy agent would advise them to do, then the market will use it's own mechanisms to determine the "right price" of the home.  

It's simply inefficient to judge the real price of the property off of the list price.  Run your numbers and offer what makes sense.  When you let the numbers tell the story then you don't lose deals because you were anchored by some dumb agent's list price, and you don't get swept up into manias.  If your agent is good, then go with their advise AS LONG AS the numbers work at that price.