Here's How Low You Can Go in Making an Offer on a Home

With home prices as crazy as they are these days, as a buyer, you want to get the best deal you possibly can—without losing your chance of getting the home of your dreams.

How much should you offer on a house? The not-so-simple answer: It depends on the market you’re in, the list price, what kind of mortgage you, as the potential home buyer, are comfortable with, and many other factors that you should weigh before beginning negotiations.

Of course, every buyer wants to score a deal. It can feel good to negotiate a seller’s price down, and even a small price cut can make a big difference to those monthly mortgage payments.

But, if you go in with a lowball offer, you could risk offending the sellers—and having them write you off completely. Buying real estate is all about striking the right balance. Here are some questions to ask yourself to help you figure out that happy medium, and to help you land on the perfect offer price.

0:23 - Are you in a buyer’s or seller’s market?
Before you make any purchase offer, determine what type of market you’re in. Traditionally, buyer’s markets come with a lot of flexibility on price, because available inventory is high and houses tend to sit on the market for longer. Here, sellers tend to be more willing to negotiate, because offers are few and far between.

0:52 - How long has the listing been active?
If the house has been on the market for a long time, the owner is probably motivated to sell as soon as possible, and that can mean flexibility on price. In the worst case, if you come in with an offer that’s too low, the seller might come back with a counteroffer that’s still reasonable.

1:30 - How does the price compare to similar homes in the area?
Once you have a general sense of how much wiggle room there is to work with, it’s time to look at comparable sales in your desired neighborhood. Ask your agent to work up a comparative market analysis (also called a comp or CMA), which will show you the list and sale prices for similar homes that have sold in the last few months. Use that as your guide to home buying.

2:08 - How badly do you want the home?
Last but not least, ask yourself: How would you feel if your offer got rejected? Let’s say you’ve been house-hunting for a while and you’ve finally found your dream home. It may be worth it to consider offering exactly what they’re asking for—or a bit more—to let the seller know you’re move-in ready. If you think you’ll be able to move onto the next property without any issues coming up, there’s no harm in trying to score a deal. In the worst case, the seller rejects your offer and you go back to house-hunting. In the world of real estate, there’s almost always a long list of new and exciting properties.

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Learn More about the home buying process: "Home Buying 101: How Do I Get Started?"
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