Should You Pay Above Asking Price

Should You Pay Above Asking Price

  • Chelsea Dimin
  • 10/14/22

Should You Pay Above Asking Price?

Many Buyers are bidding over asking price in the current Seller’s market. While this can seem daunting, there can be an over-asking strategy in place that justifies paying more than the list price. When you consider appreciation rates, you can determine how long it will take to gain back the return on the over-asking amount. The appreciation rate is the rate at which an asset grows in value.

Surging market prices are showing high appreciation rates since just one year ago. Once you compare recent sales with historical sales in a specific neighborhood, you can gather a general range of the appreciation rate. Even a modest 5% appreciation rate can be seen in neighborhoods like Haiku Town Acres since one year ago.
Request a lender to show how soon you can expect a return on your home purchase. Once you know how long it will take to gain back the difference between the ask price and the offer price, you can decide if submitting an overpriced offer is worth securing the purchase in a market where prices and interest rates continue to increase.
Also consider if it is worth waiting several months, price, and interest rate increases later. By then, you could have already been in an advantageous equity position had you bought sooner.

Financing Buyers Should Be Aware of the Appraisal Gap

Since many appraisal values cannot keep up with the surging real estate market prices, it is common for property appraisal values to come in substantially lower than the offer price. The appraisal gap requires over-ask buyers to cover the gap in price with cash or use appraisal gap insurance, a tool that can be implemented as part of your mortgage insurance.
According to Gary Rosenberg, seasoned Mortgage Broker with Ohana First Mortgage, the recent trend of appraisal gap clauses has resulted in Buyers having to increase their down payments to 30% – 35% to cover the difference between the low appraisal value and the purchase price in order to close.

The Appraisal Gap Clause

To offset the risk of low appraisals, it is common for Sellers to require an Appraisal Gap Clause before accepting an offer that is contingent on financing. An example of this clause in a purchase contract could state “In the event the property does not appraise for the full amount of the sales price, Buyer agrees to increase the amount of Buyer’s down payment as required to close this transaction.” The risk to cover the difference is placed 100% on the Buyer.

What does this mean for today’s Buyer?

Appraisal gap clauses demand higher down payments. Buyers should be prepared with a 30% down payment to cover an appraisal gap clause to make a financing offer as competitive as possible amongst the prevalent multiple offer situations. I recommend financing buyers ask their lender about appraisal gap insurance since this can help those that can afford monthly payments but might not have the cash funds available to cover the appraisal gap.
Do you need help creating a competitive offer? Contact me so I can ensure you are positioned to submit the strongest offer possible for your unique financial situation.
Chelsea Dimin

Chelsea Dimin

Realtor® Broker

About The Author

Chelsea Dimin stands at the pinnacle of Maui's luxury real estate, consistently ranking among the top 1% of agents in sales volume. Chelsea specializes in oceanfront property and vacation homes and has over 17 years of expertise in real estate, business development, and advertising sales.

Originally from Milwaukee, Wisconsin, Chelsea holds degrees in Journalism and Spanish from the University of Wisconsin Madison. Her career journey led her to Los Angeles in 2006, honing negotiation skills representing top brands in digital media and advertising sales. In 2010, she joined New York Magazine's digital publication,, as the West Coast Advertising Sales Account Executive. In 2014, Chelsea embraced Maui's allure, obtaining her real estate license and collaborating with a local developer. As a Realtor Salesperson, she played a key role in transforming vacation rental estates into profitable ventures, attracting a global clientele.

Acquiring her Broker license in 2017, Chelsea made history in January 2023, becoming the first female Realtor to list and sell a $32 million dollar home in Makena, as reported by the Wall Street Journal. Today, Chelsea guides buyers in realizing their Maui dream homes. Known for tenacity and creativity, she forges connections, assesses needs, and delivers strategic results. Chelsea's signature is creating opportunities, leveraging a global network for off-market deals and win-win negotiations.

Clients appreciate Chelsea's commitment to staying informed, providing updates on values, market trends, and recommendations. Beyond real estate, Chelsea enjoys an active lifestyle, engaging in surfing, yoga, barre classes, mountain biking, beach runs, jungle hikes, and waterfall adventures with her husband Tim and beloved pitbull, Lulu.

“My mission is to exceed your expectations so that you never hesitate to refer your friends, family or coworkers to me in the future.”

Work With Chelsea

Are you interested in buying or selling a home on Maui? Contact me to tap into my local knowledge and global connections. My mission is to exceed your expectations so that you never hesitate to refer your friends, family or coworkers to me in the future.

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