How Much Should You Offer on a House?

You’ve done all the leg work. You’ve found a real estate agent, secured your financing, viewed homes for sale, and found just the home you’ve been looking for. Now it’s time to make your offer. The question is how much should you offer on a house? Should you meet the seller’s list price or try to negotiate a lower price? Is there a situation in which you might need to offer a higher price?

 

This can be a nail-biting time. After all, if your offer is too low, you might lose out to another buyer. If you offer too much, you might end up paying more than you have to for the house. The truth is, how much you offer on a house will depend on a number of variables. The following points are what you need to take into consideration when determining how much to offer an offer on a house.

 

How Much You Can Afford

You can only offer as much as you can afford. This means you need to check all your financial requirements and determine the maximum house price you can pay. The best way to do this is to use a mortgage calculator to determine what your monthly payments would be based on the principal, interest, and property taxes. Ideally, this should not equal more than 30% of your gross monthly income.

 

The Current Market

There is the buyer’s market and the seller’s market. In the case of the buyer’s market, housing prices are lower, and you will have the advantage. This means you can go in with a lower offer and negotiate a lower sale price.

 

In a seller’s market, the reverse is true. The seller has the advantage, the price is higher, and the competition can be fierce. In this situation, you will likely have to put in a higher offer in order to secure your new home.


What Homes Are Selling for in the Area

It is wise to research what comparable homes are selling for in the area in which you want to buy. Your real estate agent should help you with this. If you find a home that is listed for $500,000 when homes of a similar size, within half a mile, and with similar square footage and features have been listed at around $400,000 for the past three months, you can put in a lower offer and argue that the house is worth less in the current market.


The Condition of the Property

This is something you must pay attention to during your viewing of the home. Look for any signs of damage, repairs and renovations that need to be made, and décor that needs to be updated. If the roof needs replacing, the electrical needs upgrading, or the wallpaper and wood paneling are from the 1960s, you may be able to put in a lower offer.


The Length of Time the Property Has Been Listed

If the house has been listed for more than a few months, the seller may be highly motivated to sell. They just want the property off their hands so they can move on, which gives you leverage to negotiate them down in price.


The Bottom Line for House Offers

When you take all the variables above into consideration when deciding how much you should offer on a house, think of it this way – you can make a lower offer on the house when:

 

  • You are in a buyer’s market
  • The home needs a lot of repairs or updates
  • The home has been listed for a few months

 

You can offer the list price when:

 

  • There is a lot of demand from other buyers, and you want to remain competitive
  • You want to make sure there is negotiating room for seller’s concessions
  • The price you are offering matches the actual value of the home

 

You can consider making a higher offer on the house when:

 

  • You are in a seller’s market
  • The home is underpriced
  • There are cash buyers competing for the home

 

When it comes to today’s market, the reality is that 2021 has very much been a seller’s market. Prior to COVID-19, the supply of new construction homes and resale homes was lower than the demand for these homes and the pandemic has only made that supply and demand more unbalanced. So, buying a home now will require a higher offer, regardless of where the other variables stand.

 

Still, you should take all the variables discussed above into consideration when you are deciding how much to offer on a house. And be sure to get your real estate agent onboard. They should be fully qualified to help you determine your offer, so that you can get the most bang for your buck.

 

Want to know more about how to make an offer on a house? Connect with us today to get more information and to have your other real estate questions answered.

 

 

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Published 12.30.21

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