More than half of the homes in today's red-hot market are selling well above their asking price. Here are ways to come up with a competitive offer that is right for you and your budget.

Post-pandemic, the housing market has seen record highs with very little chance of crashing. More than half of the homes on the market are selling over their list price, according to data from Redfin. The current hyper-competitive market is resulting in multiple offers, homes being sold almost as soon as the for sale sign goes up, and buyers offering thousands of dollars over the asking price. In other words, people are doing whatever they can to make their offers stand out to lock down the home of their dreams.

"In this current market, it's not uncommon for buyers to submit offers for $50,000 to $100,000 over asking price, waiving appraisal contingencies, and paying $30,000 to $100,000 above appraisal," says real estate broker Stephanie Williamson. But this might not be the best thing for your money in the long run. "In my opinion, this is a recipe for disaster if you don't run your numbers. In the event the market corrects or there's a downturn, it poses a risk for the owner to become upside down in the loan," says Williamson. While it is not uncommon to pay one to three percent over list price, Williamson suggests talking to your realtor and lender to come up with a number that is best for you, so you're not putting in an offer that's beyond your means.

Although experts say the market is unlikely to crash this year, there are no guarantees about what could happen with the market in the future. Since a home is a big, long-term financial decision, it's important to treat it as such and consider all your options carefully when determining how much to offer—especially if you're a first-time homebuyer.

Here are some expert tips to consider when submitting an offer on a house, and deciding how much over the asking price you should really go.

1 Find out how much other homes in the area are selling for.

Do your research and get to know your prospective neighborhood. Figuring out how much other homes in the area are selling for is a good way to determine how much over the asking price makes sense.

"Always ask for a comparative market analysis (or CMA) from your agent before you make an offer," says realtor Scott Bergmann. "This will make sure that you are not just going off the listing price but a more factual and data-driven offer." While these in-depth reports and data can be challenging to navigate, your real estate agent should be able to make sense of it to come up with a number that is right for the market— and your budget.

2 Rely on your agent—and have them see what other terms will make your offer stand out.

Speaking of your agent, make sure you have a good one. Obviously, your agent is a pretty major player in the process of buying a home, but they're especially important when you're getting ready to submit an offer. You need someone who knows the area well and who will advocate for your needs as a buyer, negotiating with the seller on your behalf.

"Choosing an agent that is not only aggressive but has integrity will save you in the long run," says Williamson. Your agent will be the one doing market research with you and figuring out the best way to make your offer stand out, especially if you find yourself in a bidding war. 

As a buyer, it's a good idea to know which terms are most important to the seller, such as price, shortened contingencies, or a flexible timeline. 
"[Buyers] can rely on their real estate agent to give them the information they need to make a competitive offer," says real estate agent Sherry Chen.

If you're really set on a home, (especially in a competitive area), have your agent talk to the seller to figure out ways to make your offer work and any other terms besides price that will help you close without having to pay an unreasonable amount over asking. 

3 Set financial boundaries and ask yourself if the house is genuinely right for you.

Buying a home can be an emotional process, and it's definitely a big investment—so it's important to make sure you're making the right decision for yourself and your financial future. 

Bergmann suggests figuring out the affordability of any amount higher than the actual listing price since most homes are selling over the asking price in this market.

"Have your personal financial boundaries set before you make an offer. It doesn't matter how much you love a home you have to be able to afford it consistently," advises Bergmann.

Work with your lender to calculate how much the monthly mortgage payments will be to determine an offer amount that is feasible. 

It's also a good idea to reflect on whether you genuinely love the house and the neighborhood—and if the house actually appraises at the value that it is listed for—before you determine how much to offer. 

Bottom line: There is no catch-all formula for how much over the asking price you should offer. While today's red-hot market requires your offer to be competitive, it's important that you are comfortable with the amount and that it aligns with your long-term financial goals.