Shopping for a home these days, it's easy to get caught up in what seems like a buying frenzy. Real estate agents, friends and headlines will tell you that bidding wars are rampant, pre-emptive all-cash offers are the order of the day, and that paying hundreds of thousands of dollars above the asking price is not only normal but often required if you want to snag a home before prices rise still further.
Take a deep breath. In San Francisco, perhaps the most competitive market, yes, 71.2% of homes sold for above the asking price in September. But only 8.3% above the asking price, on average. On a median sale price of $1.525 million, that's $127,000. That's a lot, but it's not hundreds of thousands of dollars.
So, before swinging for the fences with a big above-ask bid, ask your real estate agent for recent comps that prove the need to do so and study recent sales on Zillow and Redfin.
Remember, the home bidding process is opaque, meaning the buyer is at a big information disadvantage. Nobody has to — or likely will — show you other offers on a home you're vying for. Don't get talked into bidding against yourself.
Redfin says that in April, 74% of home offers written by its agents faced competitive bids. By September, according to Redfin's analysis, 59% of sales were competitive. Put another way, on 41% of deals there was but a single bidder. Being that party should accord one some negotiating power.
A look at Redfin's metro-level housing data for all home sales in September (not just those represented by Redfin agents) shows where buyers can expect to face the most competition and where they won't — and may even be able to snag a deal. Pay close attention to the sale price vs. the list price.