Buying a home has traditionally involved negotiating the sale price down from the seller’s asking price. Recently, however, the opposite has become common. Thanks to the hot real estate market, as many as half of all home sales now close for more than asking price. Here’s why this is occurring and how you can decide what to bid when buying a home.

Why is bidding over the asking price so common?

The main reason bidding above the asking price is occurring so often is because the homebuying market has become so competitive. The inventory of available homes for sale in many regions is low, meaning homebuyers must often compete and outbid each other to purchase the homes they want. That often means bids will go above the asking prices.

In this environment, many home sellers are purposely underpricing their homes to encourage multiple bids. This helps sellers to sell their homes quicker, and the multiple-bid process automatically helps them arrive at competitive sale prices for their properties.

This has become business as usual for real estate transactions in many parts of America, so if you’re planning to buy a home, you should prepare to bid above asking price if necessary.

How much over asking price should you bid?

Here are the main factors that will determine how high you should bid on a home:

  • How much can you afford? Naturally, you shouldn’t bid more than you can afford to pay for a home, which is why getting preapproved for your mortgage to set your homebuying budget is an important first step.
  • Is the bid above or below what the home is worth? Even in a competitive market, there are usually other options, and your real estate agent can help you determine if a necessary bid is more than a home is worth.
  • How competitive is your offer? Price isn’t the only measure of an offer’s competitiveness – if you’re bidding against a cash offer or one with fewer contingencies, you may need to increase your bid by a larger amount to stay competitive.
  • Could you cover the difference of an appraisal gap? If you attempt to buy a home for more than its appraised value (a situation known as an appraisal gap), you may need to make up the difference in cash or explore other appraisal gap solutions with your loan officer.
  • How much do you want the home? Ultimately, how much a home is worth paying for is up to you, which means you may want to bid more for a home you love.


Paying more than asking price doesn’t mean now is a bad time to buy a home. To the contrary, waiting to buy a home could cost you more, and there are still many valuable benefits to homeownership. If you’re planning to buy a home, get in touch to get preapproved for your home financing.