Should You Offer List Price When Buying a Home in 2023
Should you be offering list price when buying a home in 2023? Prices are high, rates are high, and the frenzy of bidding wars of 2020-2022 is behind us! Doesn’t this mean you can negotiate on price now?
Well… not quite. Here’s why.
As I record this, it’s May 2023, we are right in the middle of Spring market. This Spring market is on pace to have the lowest inventory ever recorded. What does this mean for you if you’re buying a home? Well, it means there aren’t enough homes out there for everyone who is looking. So, if you want to beat out all the other buyers for that home you loved, yes you should offer the list price. Yes, even in this market. Correction – especially in this market.
Here are 3 reasons you should consider offering at least list price when bidding on a home:
REASON NUMBER 1: WIN THE HOME
You’re more likely to win the home. With multiple offers back on the scene, you stand a big chance to lose out on that home you loved if you are not starting your bid at list price. Sellers have options. With so many buyers bidding on the same home, they may choose to not respond at all to offers that are not at list price.
REASON NUMBER TWO: SHOW YOU’RE SERIOUS
When you put your best foot forward and offer list price on your initial offer, both the seller and the seller’s agent see you as a serious candidate. This opens the doors for cooperation and negotiations while you’re in escrow.
Escrows can have hills and valleys, and you may need something from the seller through that process, whether it’s repair for something that popped up that no one expected, or more time to complete your due diligence or close the deal. A million things can happen in escrow. If you’re seen as a serious candidate, that they don’t want to lose, you are more likely to have cooperation.
REASON NUMBER 3: OFFERING LIST PRICE MIGHT SAVE YOU MONEY IN THE LONG RUN
What do I mean by that? Your home inspection happens after your offer has been accepted. During the home inspection, a myriad of things can come up in the home. Home repairs can be costly, whether it’s plumbing, roofing, electrical. If you offered list price from the beginning, the seller will feel more comfortable issuing credits or repairing some of those items for you. It will save you from having to come out of pocket, after close. Hey! You just saved some bucks.
BONUS ROUND
I know I said 3 reasons, but I’m going to give you a bonus round.
When you look at a market like 2023, when we are seeing multiple offers and bidding wars again, what happens is that all the homes that are on the market today become comparables for homes that will come on the market in June. So, if May homes close slightly higher than list price, that becomes the base number for June, when June homes close slightly above list price, that becomes the base number for July. This is how you get price appreciation.
What this means is that if you keep waiting for things to get easier, or keep negotiating on list price, you may find yourself shopping in July, August, September when prices have increased. Which means you’ll pay more. By offering list price now, you are actually paying less for your home in the long run.
BUT, I DON’T WANT TO OVER PAY
Absolutely! That’s why we get an appraisal.
The appraisal will tell you what the home’s fair market value is, and if it’s higher than the purchase price, you can work with the seller–as long as you have an appraisal contingency in the contract, which you should definitely have!
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