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How much to offer on a house

It depends on the housing market and other factors

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You’ve found your dream home that checks all your must-have boxes, but it can be hard to determine how much you should offer for the home. Offer too low, and you risk losing out to other bidders. Too high, and you may end up overpaying.

To determine the right offer for your dream home, you should consider various factors, such as current market conditions; the property's location, size and condition; and the seller's motivation to sell. It's also important to stay within your budget and financial capabilities. The goal is to find a reasonable price that works for both you and the seller.


Key insights

  • The local housing market can vary greatly, so it's important to research recent sales and prices of comparable homes in the area to determine a fair offer price.
  • The condition and location of the property can greatly affect its value and determine if you should offer higher or lower than the asking price.
  • Only start with your strongest offer if there is a lot of competition on the house.

What is a reasonable offer on a house?

Many factors go into making a reasonable offer on a house. Your real estate agent (called a buyer’s agent) can help you determine a fair offer based on some of the following:

  • Overall housing market
  • The home’s comps
  • How long the home has been on the market
  • Condition of the home

For example, if your agent believes the home is overpriced to begin with based on these factors, then a reasonable offer may be below the asking price. You will also need to recognize if you are in a buyer’s market or a seller’s market, since that will help you determine how flexible the home price is.

Purchase offer prices are typically negotiated after the seller receives your initial offer, so your agent may recommend a price that leaves room for those negotiations. For example, you may decide to offer 5% below the asking price so you and the seller can ultimately agree on a price in the middle.

Keep your preapproved loan limit in mind

In addition to offering a price that aligns with the value, you want to consider your preapproved loan amount (which is the maximum amount the lender will lend to you). If you are searching for homes near your price limit, you’ll want to keep in mind that the final sale price could be higher than the list price, which would put you over your preapproved loan amount.

You may want to consider homes in the middle of your price range so you have some wiggle room for negotiations if a bidding war occurs between many potential buyers.

» MORE: Does mortgage preapproval affect your credit score?

When it makes sense to offer the asking price or less

You may decide to offer the asking price or less if the home hasn’t been listed for a long time and there aren’t many offers yet. If the seller is motivated to sell quickly, offering the asking price could up the chances of your offer being accepted.

However, it might also make sense to see if the seller will accept less than the asking price in specific cases.

Making offers on vacant houses

If a home is vacant, there’s an assumption that the seller has already moved and is currently paying two mortgages (one for the listed home and another for the home they currently live in). In this case, the seller may be more motivated to wrap up the sale quickly with an offer below the asking price.

Making offers on fixer-uppers

If the home needs significant repairs, it may not have as much buyer interest as a new build or recently renovated home. Also, if the home inspection reveals more repairs than you anticipate, you may be able to negotiate a price reduction with the seller.

Making offers on properties with low demand

If it’s a one-of-a-kind property, there may not be as much interest. For example, homes with many acres of land aren't as sought after as homes situated on just an acre. Many buyers don’t want to pay for and maintain that much land. Your agent may advise you to offer below the asking price in those cases.

Making offers based on available comps

Offers below the asking price may be appropriate, given the market and the available comps. For instance, if your agent advises that the home is a bit overpriced based on the comps, you may decide to offer a price that’s more in line with what similar homes are selling for in the area.

» MORE: Buy, build or fix: What’s best for first-time homebuyers?

When it makes sense to offer more

There are times when offering more than the asking price can be a strategic move to secure your dream home. It’s not uncommon for homes to sell above asking price during a seller’s market, which is when the supply of homes listed for sale is lower than the number of homes demanded by buyers.

Make a high offer when competing

You may decide to offer more than the asking price if the seller is expected to receive multiple offers and has a short deadline to choose one. In addition to offering more than the asking price, you may also include more due diligence money, which is nonrefundable, to show the seller you're a serious buyer.

Make a high offer in a seller’s market

When you are trying to buy in a seller’s market, you need to realize that the seller has the power. They are likely going to list their home at a competitive price with the goal to start a bidding war.

Make a high offer when there’s investment potential

If you believe the property has significant investment potential and you’re willing to pay a premium to secure it, offering over asking could make sense in the long run. For example, the property could be in a highly sought-after neighborhood or may have unique features — both of which could bring about a strong return on investment should you sell the property later on.

» MORE: 5 ways to determine house value

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