How Much To Offer On A House: Finding The Sweet Spot

So the home search has ended – at least for now – and you’ve found a home you want to call your own. Hurray!

Whether it’s a starter home, an investment property or the forever home you’ve dreamed of, the next thing you may be wondering is how much to offer for it. Fear not. We’re here to help you navigate the ins and outs of that exact question and identify your offer “sweet spot.”

5 Factors To Decide How Much To Offer On A House

There are a few factors to consider before making a reasonable offer on a home that works for you and the seller. Let’s explore the factors that can impact how much you offer on a house.

1. Consider The Market

How much you should offer on a house will largely depend on the market conditions in the area. If there are more homes than buyers, making a lower offer may be acceptable. But if there are more buyers than homes for sale, you may need to offer a higher amount to encourage the seller to accept your bid.

Depending on several variables, the local market can favor buyers, sellers or neither. Let’s look at how each market type may affect your offer price.

Buyer’s Market

A buyer’s market can mean home prices are low, inventory is high or both. Ultimately, it means more homes are for sale than buyers looking to purchase them. Under these conditions, buyers can often make offers that are lower than asking prices and insist on more contingencies. As you have likely realized, a buyer’s market isn’t an ideal market for sellers.

Seller’s Market

It’s a seller’s market when home prices are higher, inventory is low or both. Seller’s markets happen when there are more buyers than homes for sale. With many buyers competing for the same homes, bidding wars are common. In a seller’s market, the buyer with the most competitive offer typically gets the home. Buyer competition and fewer homes for sale means you’ll likely pay close to or over asking prices.

Balanced Market

Home prices aren’t too high or too low, and inventory follows the same trend in a balanced market. Since sellers and buyers can easily walk away from a deal because they have roughly equal power, balanced markets are ruled by comparable properties (comps) as the basis of negotiations. Having your agent use their expertise to research the market value of a home is even more essential in a balanced market.

2. Consider The Condition Of The Property

Of course, the home itself will play a big role in determining how much you should offer. Homes can come in various conditions regardless of the real estate market. Move-in ready homes typically go for higher prices than fixer-uppers.

Consider a property’s condition before deciding how much you’ll pay to own it. Is it going to require significant repairs or remodels to fit your lifestyle? If so, it may not be worth as much.

3. Be Mindful Of Your Budget

The key to deciding how much to offer on a house lies in a buyer’s understanding of their budget. You likely had a number in mind that you were willing to spend before you even started searching, but a quick reevaluation of your budget before submitting an offer is always a good idea.

While your budget isn’t the most exciting part of home shopping, it’s crucial. Without a realistic budget to guide you, it can be hard to know how much home you can afford. Remember to factor in all your planned expenses, including mortgage payments, utilities and other homeowner costs. If you want a more accurate estimate, use a home affordability calculator.

4. Check The Listing’s Active History

Knowing how long a property has been on the market can help you gauge how much to offer. You should be able to find that information on a real estate listing website or have your real estate agent pull it.

If the property has only been on the market for a couple of days, the seller may be confident that they’ll receive an offer that at least matches their asking price. The seller may be more motivated to sell and more flexible about negotiating a lower offer if the property has been on the market for several months or the seller made multiple price reductions. If your purchase offer is too low, the seller will likely make a counteroffer.

5. Compare The Listing Price To Similar Homes

To help assess whether the current listing price is fair and how much wiggle room you may have with your offer, look at similar properties in the area or get a comparative market analysis from your real estate agent. When looking for comparable properties in the neighborhood or area, consider the property’s condition, number of bedrooms and bathrooms, square footage and more.

Analyzing real estate comps will be crucial in helping you determine whether a home’s asking price is reasonable and assessing the chances of the home selling for a lower or higher price than asking.

When To Make A Larger Offer On A House

Sometimes, making an offer over the asking price can be a good idea. It may be worth paying a little more for your ideal forever home than buying a temporary house you’ll resell in a few years. If the property has multiple bidders, a higher offer may give you a better shot at winning the bidding war.

How Much Should You Offer Over The Asking Price?

Precisely how much you should offer over the asking price is another question entirely. To calculate this number, have your real estate agent look at similar homes in the area and how much they’re selling for. Consider that information alongside your budget to determine the highest offer you’re comfortable making without overextending your finances. The last thing you want to do is end up in an overpriced house you’ll struggle to afford.

Buyers employ two main strategies to determine how much is reasonable. In a bidding war, some buyers offer between 1% – 3% over asking to make their offers stand out. Other buyers rely on their real estate agent to gather intel on the other bids on the property, then top the highest bid by a few thousand dollars. You can also consider waiving contingencies to make your offer even more competitive – but proceed with caution.

When To Offer Below The Asking Price On A House

Sometimes, you can purchase a house for less than the asking price, which usually happens when there is little to no competition for the property, often during a buyer’s market.

But how little is too little, and how much is too much? Although buyers are free to offer whatever they see fit, there are a few guidelines to consider when determining how much sellers typically negotiate down on their asking price.

Less Than 10% Below Asking

If the home is in good condition and could use a few cosmetic updates, offering less than 10% below the asking price may make sense. While this may not lead to dramatic monthly savings, you may save enough to cover the finishing touches that finally make the house your home.

But if the property is in great shape, move-in ready, needs no repairs and fits your needs, it may be best to make an offer close to the asking price – even if you’re in a buyer’s market. Offering close to or at asking can make it easier to buy the home and move faster to closing.

Between 10% And 20% Below Asking

It may be appropriate to offer 10% – 20% below the asking price if the home is dated and needs relatively major renovations. Consider this range if the home needs new appliances, fixtures or cosmetic updates, like new carpets or flooring. For example, if you think you’ll need to gut a bathroom and estimate it will cost $10,000, bringing in the offer at $10,000 under asking may be a good strategy.

20% Below Asking

Offering 20% below asking is sometimes called a lowball offer. Dropping an offer this low is justified if the home needs extensive repairs to bring it up to code or make it livable. If the property has problems like roof damage, plumbing and electrical issues or foundation problems, it may be reasonable to offer 20% below the asking price. Coming in this low can free up some cash in your budget to help cover the cost of repairs.

FAQs On Making An Offer On A House

Let’s review some frequently asked questions about making an offer on a house.

How much should I offer on a house with multiple offers?

In a competitive seller’s market, where multiple bids are standard, make sure your offer isn’t below the home’s asking price and be prepared to walk away from the deal if necessary. Consider offering more than asking or even offering to pay all or a portion of the seller’s closing costs. Underbidding won’t help in a competitive environment. And if you can, paying cash can help your chances significantly.

How much less should I offer on a house when paying with cash?

When purchasing a property all cash, offering up to 20% off the original asking price can be reasonable. Anything higher may be unrealistic considering the property’s value. Most sellers prefer all-cash buyers because it speeds up the sale and decreases the risk of the deal falling through due to financing.

How can I strengthen my offer if it’s below the asking price?

Even in a competitive market, you can add perks to strengthen a purchase offer below asking and make it more appealing to a seller. Consider offering a larger earnest money deposit, being flexible about a seller’s needs, such as changing the moving date, or waiving certain contingencies, such as a home inspection or appraisal. An offer below the seller’s asking price may end up a winning offer with the right combination of favorable terms.

The Bottom Line: How Much You Should Offer Depends On The Property And The Market

Finding the right price for your home is part science, part negotiation. A buyer should base their offer on the market and the property. You may need a higher purchase offer in a competitive seller’s market. But you may get away with a lower offer in a buyer’s market.

Rely on your research and listen to your real estate agent’s advice. Together, you can determine an offer that gets you comfortably into your new home.

Ready to take the next step toward making offers with confidence? Start the approval process with Rocket Mortgage^® to determine how much home you can really afford.