If you’ve found a home that suits your needs, you’re probably wondering how much you should offer on the house, thinking that a low-ball offer that’s way below the asking price could lose you your dream home and one that’s too high could cost you a ton of money that you didn’t have to spend.
Before you even begin thinking about this guide on how much to offer on the house, you need to ask yourself a simple question: what do you want? Are you someone looking for a home for you alone, without too many specific requirements or needs? Or have you found the perfect neighborhood near the schools you need, 5 minutes away from the supermarket, free of noise and crime, just the right number of bedrooms and bathrooms, with the perfect kitchen, play area, and living space?
If you have those needs and you’ve found the house you badly want, you will have to play the pricing game a little differently. Here’s our rundown on how much you should offer on the house based on your specific needs.
Determining the market value
Market value is something you’re going to have to research when deciding how to answer the question, “How much should I offer on a house?” Determining the fair market value of the home will help you to decide if the current asking price is reasonable and how much you should negotiate.
Your real estate agent should look at similar houses in the area that have sold on the current market to help you decide whether the asking price is too high or low compared to the value of the property.
Savvy home sellers will consider the psychology of people interested in buying a new home when they price their property. It pays (literally) for you to think about the same factors.
For example, if you or your agent discovers that a house is priced too low for the current market values, even though there doesn’t seem to be anything wrong with the property, you may anticipate a common selling tactic based on this below-market price. The seller may be wanting to encourage competition between willing buyers to drive up the price based on emotional bidding decisions.
A high price could also be a reverse strategy, a way to get you to buy a house based on the fact that you feel like you’re saving money. This works by encouraging you to make an offer around the actual market value of the house, which the seller will accept. You feel like you’ve gotten a deal when in reality, you may not have bought this house if it was priced competitively to begin with.
Before you get caught up in an auction or bargain shopper’s mentality, remember the original question: what do you want? Deciding how much you want this particular house is instrumental in planning your next move.
How much to offer on a house?
If you’ve done the research and you know that the house is priced competitively and you want to make a bid, how do you decide how much you should offer? It comes down to the market you’re in and the desire you have for this house. It's always useful to really think about how badly you want the property and if you're ok with losing it to a higher offer. Oftentimes buyers who find their dream home will get too hung up on trying to negotiate the pricing, and end up losing the house. If you love the home and think the asking price is reasonable, it's always recommended to make a fair offer and get the deal closed quickly.
How much below asking price should you offer on a house?
There's no set percentage on how much below the asking price you should offer. If you've determined the home is overpriced you should consult with your agent and come up with a reasonable offer you're comfortable with. In some markets a fair offer might be 5 or 10% below ask, while in others it could be 25% or more below the asking price, especially if the seller used a "pie in the sky" pricing strategy.
A low offer might also be a good bet if the market is what’s called a “buyer’s market.” This means that there are a lot of houses for sale right now and not as many buyers. Sellers will be waiting for a chance to jump on an offer, depending on how much of a buyer’s market it is, maybe even one that’s well below asking price.
You may also want to offer a low offer just because you’re not that enthusiastic about the house. Maybe you feel it’s priced a little high, or you've found other options you'd also be happy with, or you simply don’t want it unless you can get a deal.
Additionally, it pays to look at the history of the listing. A seller will be more likely to accept a low offer if the house has been on the market for a while. They may figure that your offer is the best they’ll get.
What about a high offer?
An above-asking price offer might be a good bet if the market is a “seller’s market,” meaning that there are few houses and lots of buyers in competition.
This is where that question of what you want comes into play. If you want a house, especially a recently listed one, you may need to put up an offer above asking price to seal the deal. No one wants to spend extra money, but no one wants to lose their dream house either.
Do I have to go high or low?
Of course, there’s always the third option: offering the asking price. If the market is balanced between buyers and sellers and the asking price is fair and reasonable, you may want to offer what they’re asking. This is especially true of a house that you want that was recently listed – they may be ready to sell right away at the price they asked for.
You can also be flexible with other aspects of the listing, such as the down payments, contracts, and other nitty-gritty aspects of the process as this can make your offer look better without adding any money to it.
Deciding how much to offer on a house can be troubling because you don’t want to lose the listing or pay too much. This is why this guide is intended to help you use the market to decide whether a low or high offer is most appropriate, or if you should simply pay the asking price. At the end of the day, there's a lot to consider, including if the desired property is a must-have for you, how easy it will be to find similar options, as well as sort out the seller’s potential motives in the asking price they’ve listed in the first place.
No one piece of advice is appropriate for all situations. Just remember that the main factor to consider when hashing out your offers is how much you want the house. If it’s your dream home and you don’t want to lose it, you may need to plan differently.