Persona/income details: we make ~$230k/year in a medium-COL Midwestern U.S. city. Looking to spend no more than $550k on our first home.
House details: listed for $450k in a sought-after neighborhood. The house was purchased a couple of years ago for $38k over an asking price of $250k. The current owners have done a ton of great work and it's a beautiful spot, although the basement is unfinished. Finished square footage is 1750.
Houses have been easily going for 30-60k over asking in several areas we've been looking, and it seems as if the list prices are lower than market value either 1) for the seller's agent to say, "I sold the last house for $X over list" or 2) to cause a bit of a bidding frenzy. There isn't much inventory here, just like in other cities.
Our realtor thinks the house will go for at least $500k, and we are thinking of offering $525k to "seal the deal" as best we can (with an inspection contingency of course). We looked at a handful of recent comp sales and the price per sqft is around $325, so even at $525k this house would clock in reasonably at $300.
Is this offer stupid? We aren't in a major rush to find a house (we have until June/July at the latest for closing). The last house we offered $25k over a $440k list and got blown out of the water. Our rationalization is that 1) this is a great neighborhood and will be for the foreseeable future, 2) $525k, even at $75k list, is well within our budget, 3) the list price could be total bullshit for the reasons listed above, and 4) even if when we go to sell this place in 5-7 years we sell it for somewhere in the ballpark of what we paid, we would be fine with that since we view housing more as a necessity vs. an investment – gotta live somewhere.
After offering $70k above asking, inspection contingency, and up to $15k above appraisal, we finished 2nd out of 13 offers. Promising outcome, yet unfortunate as we didn't get it. Thanks, everyone, for all of your advice! The list price doesn't really matter – I think the sellers priced it low intentionally to stir up a baker's dozen's worth of bids.