In many real estate housing markets, including Sacramento County, any property can quickly sell for $100,000 or more over the asking price these days. This is known as the $100k Over Asking Trend and many are puzzled by this phenomenon. What’s more, luxury homes sell for $1M over the asking price in some popular California regions like the Bay Area and San Francisco.
This raises multiple questions: Why are so many buyers bidding over the asking price? How long will this trend last? How do people with small budgets compete? Can you still get price reductions for home sales in California?
In this article, we’ll dig a bit further into the housing market and find out why the seller’s market is golden right now. We’ll also give details about the median home values in Sacramento County and how to master the bidding wars in the real estate market.
How Are People Paying $100k Over the Asking Price?
Generally speaking, home inventory is at an all-time low across the country while home values continue to rise. Meanwhile, a growing number of people can now afford to move thanks to low-interest rates and mortgage rates. So it is little wonder there’s less supply of homes for sale than demand in some markets.
This is also happening in Sacramento, San Jose, Tahoe Park, Elk Grove, Rancho Cordova, South Hagginwood, Citrus Heights, East Sacramento, and many other areas of California. The housing market is booming regardless of the price per square foot or the size of the home. So whether you are looking for a one-bedroom apartment above a business or a single-family home, it’s still a sellers’ market.
Strong demand for the median home and the tight supply is causing home prices to rise in the Sacramento, California real estate market, which is why it’s skewed to those who sell their homes. Both house prices and home sales are forecasted to keep growing next year.
The $100k Over Asking trend is not limited to an expensive neighborhood; many homes in the most affordable neighborhood also see the same trends from sellers getting way above the asking price. Unfortunately, more people than ever before are forced to leave California and go to a state where the real estate market is not in such high demand.
Sacramento County will continue to experience a great deal of pressure regarding properties due to low inventory. In fact, there will be multiple offers from potential homebuyers. This makes Sacramento a sellers’ housing market, which forces more people into stiff competition.
When will it end?
Once the supply of houses becomes higher than demand, you might expect this trend to end. The same is true for many real estate markets around the country. However, there are no signs of this slowing down in Sacramento County, San Francisco, or the Bay Area anytime soon.
Today, landlords see their houses go quickly above the asking price and raise the rent to match the high demand. Therefore, homebuyers should be competitive in today’s housing market. Many of them pay $100k (or several hundred thousand dollars) over the asking price when putting in an offer to ‘sweeten’ their deal.
To close the deal, they usually apply for a mortgage or a home loan. Sacramento’s population and the housing costs, more home construction is expected in the state capital during the coming months. This could affect the median sales price compared to last year or even a decade ago.
Alternative Options
If you are looking at the real estate housing market and can’t find the type of property you had hoped to buy, then you could choose to rent a place in Sacramento, California, until the market slows down. It would make sense to rent in an area where you like the schools, and it’s close to your place of business.
This will allow you to save more money while working with a realtor in Sacramento. They will have insights into the low inventory crisis and tell you when the real estate market is more favorable and in your price range.
Whatever city you plan on buying a home in, whether Sacramento, San Francisco, Tahoe Park, or the Bay Area, know your limits. Make sure the sellers’ final sale price is within your expectations, and don’t settle for a property you don’t love just because it’s below market value.
Why Do Homebuyers Pay Over the Asking Price?
Due to the $100k Over Asking trend, it is not uncommon to see over 20 potential buyers in line for a house on the real estate market in some cities. Many homebuyers are surprisingly organized, and before making an offer, they put a lot of time and effort into working out their budget and seek financial advice before committing.
Besides, sky-high prices and bidding wars make it more difficult for buyers to make an offer on the house, especially in popular neighborhoods. It is tricky to determine how much above the asking price can be regarded as ‘reasonable.’
This is particularly true when you are supposed to make an offer promptly under pressure. That’s why many people offer $100K over asking. In some cases in California, the folks who get outbid often turn to new construction since that housing market is less competitive.
Most houses sell somewhat below asking in a normal market and when home values weren’t so high. However, in markets where the competition is tough, such as in Sacramento County, San Francisco, and the Bay Area, the $100k Over Asking trend takes place and a winning offer is regularly above the asking price.
The key is to try and secure a home without spending a fortune or at such a high living cost. You can also check with your realtor to see if there are any price reductions available, ensuring your offer doesn’t exceed 5% over the asking price.
When Do I Need to Evaluate the House Compared to the Asking Price?
To make negotiations go smoothly (or at least a bit easier), you need to set your expectations and budget in advance. This way, you will have a better idea of when to walk away and what to offer. You can always look for residential construction somewhere else in the region, including East Sacramento, where the median home values are better than home sales in San Francisco or the Bay Area.
While each situation and home is specific to the city it is located in; it is common for buyers to pay well above the asking price when making an offer. Likewise, it is not uncommon for a realtor to deliberately price homes below actual home values to make offers more compelling. This leads to a feeding frenzy for homebuyers.
The general principle of the $100k Over Asking trend states that your offer should exceed 1-3 percent (or even a bit more if needed) over the home’s price if there are many competing homebuyers. For instance, if a house is priced at $500,000, the winning offer is anticipated to be somewhere between $5,000 and $15,000 above that price.
On the other hand, cities like Sacramento, San Francisco, and the Bay Area are on the higher end of the seller’s market and can easily get 20-25 percent more than the asking price. The reason could be the top-rated California schools, business locations, or even the types of residents.
What to Consider Before Making an Offer?
As you can see, it is a good idea to offer several thousand dollars over the actual highest bid if you want your offer to stand out from the buying competition. This will increase the chances of the seller accepting your offer on the house. However, it doesn’t make sense to increase your offer blindly and pay $100,000 above asking if it’s not really necessary. This means that following the $100k Over Asking trend is actually disadvantageous for you.
That said, it is crucial to make the right offer on the house you want to buy. Don’t rush into submitting an offer without speaking to your realtor first. Above all, you need to consider a few home buying tips to avoid overpaying in the current housing market.
Check the prices of other houses for sale (with similar features) in your prospective community
Get familiar with the neighborhood and housing market before making an offer. Research to figure out how many houses in that region or community are selling and for what price. It would help if you also considered asking for CMA (comparative market analysis) from your real estate agent to get a clear understanding of the actual market value.
Make sure the home is genuinely right for you
Purchasing a house in the real estate market today is a significant investment, so be sure to make the right choice for your family’s financial future. Also, make sure you really love the home, neighborhood, and schools when determining how much to offer.
Whether you are looking in North Sacramento, the Bay Area, or some other region of California, all these details need to fit within your cost of living budget and your lifestyle as well. You can always rent a place in Sacramento County until you find the perfect property.
Set your budget and financial boundaries
Determining a max budget for a property is very important for every homebuyer. Those buyers whose portfolio is not that impressive should lower their expectations. Keep in mind; what you can afford should determine your max budget.
Rely on real estate experts to do it right and seek financial advice from a professional when in doubt. While lenders can help you work out your monthly mortgage payments, realtors can make it easier for you to set your financial boundaries and make the right decision when buying a home.
Suppose you own a business in the Sacramento region. In that case, you may want to check the housing market close to that location to qualify for tax or price reductions available to residents. This will ensure that you can afford the down payment on the house you’re buying and that the final sale price fits accordingly into your living costs.
The Bottom Line
With an increasing number of prospective buyers and home prices that keep soaring up in competitive housing markets, bidding wars tend to break out every so often. So it is often impossible to place the winning bid without paying over asking. Consult your Sacramento real estate agent before making an offer and do not give in to the $100k Over Asking trend.
What you believe your budget can afford to buy should be discussed with a local realtor. Our team of real estate experts can help you decide how much over or below the asking price you need to offer. We can make sure you’re comfortable with that amount while ensuring that your offer is still sufficient to seal the deal.
