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How Much Should I Offer For a House? 

 December 28, 2022

By Scott Teesdale  

minutes read time

The amount you have to offer for a house depends on several factors. Before beginning any negotiation for the home you fancy, it’s ideal to consider what would affect how much a house costs closely.

That’s why this post provides all the information you need to make a great offer for a house. All factors likely to influence your final offer are looked at in this read. Leverage what this post provides and get more value while landing your dream home at the same time.

Can You Trust Your Real Estate Agent to Name the Right Price Tag for a Home?

Quite frankly, no. It’s not because they can’t help you, it’s because they don’t always know. Of course, they do their best to help and guide you, but at the end of the day, the research and final decision falls on your shoulders.

Real estate agents may be unwilling to provide you with an ideal price tag for a property. The reason is simple – some factors may not be immediately noticeable when you make your first offer. Experts in the real estate market know this and shy off from making a high-value offer.

A real estate agent is more likely to advise you on how to get a lesser value than the list price. But when it comes to giving the right-priced offer, you may have to get that yourself, especially if you kept sale proceeds from your previous home sale. Follow the steps below to know how to do it:

1. Know your market

If you need to make a great offer on a house, it’s a good idea to check the marketplace you’re in. You’ll encounter one of three real estate markets when you plan to buy a house – buyers, sellers, or neutral markets.

Here’s a look at these three markets to give you a great idea of how to name the right price for a home:

Buyer’s market

The buyer’s market, sometimes called a cold market, is where homes have limited demand. More homes are on the market with very few buyers available. In such a marketplace, buyers have all the time to choose among homes (except when there’s an in-demand property).

Most buyers can find a perfect home in such an environment without going through bidding wars to get it.

Sellers in this marketplace will be more open to negotiations. Buyers have a huge opportunity in this environment to purchase houses lesser than their list price. In some cases, sellers may be open to sharing or bearing closing costs of the sale.

Seller’s market

Most real estate agents call the seller’s market a “hot” market. The real estate marketplace has more buyers than available homes.

Buyers in this environment are usually ready to meet the list price or exceed it in some cases. Sellers can cash in on their property within a short time (usually within two weeks) in this environment.

In some hot real estate marketplaces, an inspection waiver may become necessary. If you’re sure nothing’s wrong with your property, this could help you close off the sale quicker.

Neutral market (equilibrium)

The neutral marketplace is balanced with an equal number of buyers and available homes. Neutral markets are quite uncommon, particularly in urban centers. In such markets, median sales for homes are priced at a flat rate. Also, neutral markets rarely experience volatility. Comparable sales prices in these markets are usually very close to list prices.

Now that you know the marketplace you’re in, what’s next?

After knowing the kind of marketplace you’re in, it becomes easier to make an offer. Sellers will likely receive multiple offers, especially in a seller’s marketplace, so try to make a good offer. Making an offer that’s attractive to sellers puts you in a prime position to get your bid accepted.

But before making an offer, the next step will help you understand your current market better.

2. Know the comparable sales or competition in the area

Looking at similar homes recently bought in your chosen area is the next step. With comparative sales, you can compare properties’ lot sizes, style, age, location, and other characteristics. The data you gather shouldn’t be too old, preferably within six months of your compared properties’ sale.

Don’t know where to get this info? Here are a few websites I recommend:

But don’t always just rely on the internet when checking out info on comparable sales. It may not give a representative enough figure of your potential purchase. Ask your agent to help — can be the best source of information to help you get a sense of local markets.

3. Know the condition of the home listed for sale

Before you decide how much to offer a seller for, closely examine the home’s condition. Homes that haven’t been sold for some time may deteriorate. Get a thorough inspection to figure out how solid the home is before making your initial offer.

If there is a defect in the home, it can drive costs down to a point you can easily afford. For example, let’s say you’ve got a home priced at $400,000. If your inspector finds out the home has a leaking roof and inferior fittings, you could offer a lower amount.

In most cases, how much you can lower the asking price depends on your bargaining power and identified defects.

4. Other essential considerations

See if you can discover the list–sales price ratio of the home you want to buy. If you can determine the list price is much higher than what a home sells for, you’re onto something. Consider comparing homes sold around the area within the last six months.

With such information, you could get more value by offering a lower amount. Looking at the ownership/maintenance history and days on the market (DoM) of the home helps you determine a lower price.

Lastly, consider your homebuyer needs vs wants checklist. Depending on what’s on that list, and in what priority, you may be able to lower your offer!

When Should You Offer Less than the Listing Price on a House?

You should offer less than the asking price for a house when:

  • There are repairs to be made (regardless of the size of repairs)
  • You’re purchasing in a buyer market
  • When inspections and valuations reveal the home is overvalued
  • If your choice home has remained on the market for several weeks without any offer
  • If there is a large disparity between the list – sales price ratio

Consider asking your agent for advice and resources on how to make your first offer.

When Should You Offer the Listing Price on a House?

If you’re in a neutral market, it could be best to offer the listing price on a house. Some seller markets could be ideal to offer such an amount too. Ensure you have contingent approaches on the table if you’ll have to add more money to the initial offer.

When Should You Offer More than the Listing Price on a House?

You can put out more than what a seller is asking for when:

  • There is heated competition and more than one buyer wants the home as soon as possible
  • If you’re in a two-horse race with another buyer that keeps making a counter-offer within your budget
  • When houses around the area have very low disparity between the list and sales price
  • If a recently sold property comes on resale has been assessed to show its adequately valued

When you plan to offer a higher amount than what the seller requests, make sure you can afford it. You don’t want to make an offer your mortgage can’t support, or one you’ll have to backtrack on later (read our guide on first-time homebuyer mortgages).

FAQs

What is a reasonable offer on a house?

A reasonable home offer depends on market conditions. If it’s a seller’s market (hot market), you’ll definitely have to offer above list price. If it’s a buyer’s market, you could get away with offering 5% to 15% less than the asking price for a house.

When you should offer less than the asking price on a house

Offering less than the asking price is usually more common in a buyer’s market, when inventory levels are high or increasing. With that said, a few other factors to consider are:

  • If the house needs little or extensive repairs
  • When the asking price is too high
  • House has remained on a listing for over three weeks

Can I offer 20k less on a house?

You can offer $20k less on a house when the property needs some love (ie several modifications or upgrade to be brought to code). Also, you can offer 20k less on a property when the house has been sitting in listings for several months. Generally, homes with one significant defect can be priced way lower than its advertised market value.

How much can you negotiate on a new house?

If you plan to buy a recently sold home on re-sale, it’s best to negotiate within 4% – 6% of its market valuation. Make an offer that won’t offend sellers (in a seller’s market) and will allow you to avoid a bidding war.

Know how much you should offer for a house

There’s no easy way to say this – knowing how much to offer for a house involves work. Sellers are always keen to make more than their house is currently worth in a sale. And novice buyers could get scalped by smart sellers into paying more than what a house is worth.

If you notice you’re in a market that favors buyers, making a lower offer should be a reasonable start. But in seller’s markets, it could be difficult to determine how low an offer you can make.

Gathering essential info is a must if you’re keen to beat the list price of a home. Most sellers will be willing to accept your offer when they sense you’re willing to pay a reasonable amount. Purchase your home within your budget and get more value. You don’t want to grapple with a damning mortgage from having to pay more for an overvalued home.

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I use data and technology to help Millennials navigate the ins-and-outs of buying or selling a home in today's market. From appraisals to mortgages to zoning, I cover it all with the goal to teach others. Connect with me on social via the icons above.

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