Shortage in the housing market
Overbidding is a consequence of the shortage in the housing market. There is little supply and lots of demand. If you find a nice house, you often have a lot of competition. In most cases, you have to outbid them. Low-interest rates mean you can borrow more than ever. This does not mean that there are no considerable risks associated with overbidding on a property.
The level of overbidding continues to rise, bidding 10 percent above the asking price is certainly not exceptional.
Selling above the asking price
On average in the Netherlands, 3.5 percent is paid above the asking price. In Utrecht, this is a whopping 7 percent. On a 400.000 euros house, this already amounts to more than 28.000 euros. You cannot finance this amount because you cannot borrow more than 100 percent of the home value.
The value of the house is determined by an appraiser, which is then also the maximum amount you can get as a mortgage for your home. If you make an offer above the appraisal value, you have to pay the difference yourself.
Bidding without a financing condition
Bidding without a financing condition gives the seller assurance and speed. The seller will not have to wait for weeks until the financing is arranged. If you know the risks and you understand your financial options, then you can decide to buy without a financing condition. This increases the probability that you will be awarded the house.
Keep in mind that you have to pay 10 percent of the purchase price if the sale is unexpectedly cancelled.
Top tips
- Make sure you know how much you can borrow and how much you can contribute from your own resources. Then you will know whether you can bid above the asking price and by how much.
- It is important to know what a house is worth before you bid on it. The asking price is not the actual value.
- Decide in advance what your final offer will be. Once you walk into the home, you are emotionally involved and may get carried away.
- Hire a purchasing agent. This will increase your chances of success and help you find your ideal house, view it and make the right offer.
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