How Much Over Asking Price Should I Offer?

Recently it was reported that a home listed for $1 million received an offer for $300,000 over the asking price. Such is the real estate market in North Texas — well, pretty much all of Texas — these days. If you want to live in the Lone Star State, it looks like sellers are going to make you pay.

But how many buyers are really out there seeking million-dollar properties? It makes for a good news story, but what’s really going on with the real estate market?

List Price = Suggested Starting Price

In Tarrant County last month, over 40 percent of all accepted contracts went for over 100 percent of the list price! It’s a mad scramble out there for buyers and Realtors for sure. Multiple offers are the standard on all listings and buyers are getting more and more aggressive in hopes of getting a home.

In the past, submitting a contract offer at 100 percent of the list price gave a buyer a very strong chance of securing the home. Now the list price is more like a suggested starting price for the bidding to begin. As a buyer, if you are not comfortable going over the listing price, paying for the title policy, survey, waiving the residential services contract (third party “warranty”) that have traditionally been a seller expense, you might want to sit the next 12 months to 12 years (or more) out. It’s not going to change anytime soon.

The looming question from buyers to their Realtor is “How much over asking price should I offer?” Since these are uncharted times in real estate, there really isn’t a precedent or any historical data to assist in making an offer. Is 5 percent good? 10 percent? More?

Let’s look at various areas of Tarrant County to see what has become the new norm with sold homes over the past 30 days. For each of the following areas, I searched all for sold homes, how many went for 100 percent or over the asking price, what the average over-asking, and what was the highest percentage over-asking offered in the past 30 days.

76109 – Tanglewood Area

The Tanglewood area of Fort Worth is certainly highly desired. Not only is the neighborhood centrally located in the city, but many families are willing to spend a hefty amount to live here as the public schools are highly rated. In the past 30 days, 22 of 40 sales went for 100 percent or more of the list price. That equates to 55 percent of all sales. The highest over asking sale in the past month went for 111.4 percent of the list price. The average sales price of the 40 homes recently sold was $629,538.

76179 – Saginaw Area

Saginaw is north of Loop 820 and West of I-35 in North Fort Worth. This area has gone from a sleepy town to a bustling area of new growth over the past 20 years. Home prices are still relatively affordable, the school system is improving, and the city has done a good job of putting tax dollars to work with improved roads, schools, and municipal workers. In the past 30 days, 96 of 120 homes sold for 100 percent or more of the list price! That is an 80 percent clip. The average list price vs. sold price was 102.62 percent with the high at 117.86 percent. The average sale price of the 120 homes recently sold was $351,928.

76108 – White Settlement and West

Another location of rapid growth is the White Settlement and West Fort Worth area served by 76108 zip code. In the past, this has been an area where production home builders have feasted because there is plenty of undeveloped land to build mass planned communities. As land is being gobbled up by developers and builders, the frenzy is being felt in the home sales market. In the past 30 days, 82 of 97 sales sold at 100 percent of the asking price or more. That’s an 84.5 percent average! With the average sales price at $270,771 and climbing, the highest list price vs. sold price was 113.04 percent.

This area has predominantly been home buyers taking advantage of FHA loans that allow for very little money out-of-pocket for a down payment. It’s mind-boggling and concerning that at this price point homes are being sold for more than 10 percent over the asking price. At some point in time, even “affordable” locations are going out price-out a large segment of the buying population that can’t put additional cash into a deal at closing.

76028 – Burleson Area

Head south of Fort Worth about 20 minutes to the city of Burleson. Dissected by I-35 and with a small-town feel, Burleson has always been an attractive destination for those who want a little more space and a little less big-town feel. Recently 78 of 103 homes sold for 100 percent or more for list price which is 75.7 percent of the transactions. The average home sold for 103.45 percent of the list and the high was — wait for it — 215.15 percent! Yes, can you believe it! Someone was actually willing and able to offer 215.15 percent of the list price! Imagine the shock the sellers felt when they received that offer. The average home sales price in Burleson over the past 30 days was $334,811

The Takeaway

All these numbers and percentages and blaa blaa blaaa … What does all this mean? Have we learned anything useful from this exercise? First of all, we’ve learned that if you want to purchase a home in Tarrant County or surrounding locales, no matter what area or price point, the chances of you having to offer a price over the asking price are pretty high.

While there still isn’t a consensus of a standard percentage over the asking price to offer, if someone really wants a property, they will pay more than double for the property, as crazy as that seems.

Talk to your real estate sales professional, come up with a strategy and an amount before you start the process, know your budget, know your financial threshold, and don’t get emotional until you get the keys. Ready, set, go!