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Determining the right offer for a house can often feel like a delicate dance. While buyers aim to secure their dream home without overstretching their budget, sellers are looking to get the best possible return on their investment.
So, how much below asking price is reasonable to offer? The answer isn’t always straightforward, as it depends on the state of the current real estate market, the condition of the property, and the urgency of the seller.
We’ll discuss what’s reasonable to offer to ensure you strike a balance between securing a great deal and not offending the seller with a lowball offer.
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Should I offer less than asking price?
Making an offer on a house is as much of an art form as it is a strategic move. You want to make an offer that will save you money (of course), but you also want your offer to appeal to the sellers.
So, how do you even come up with an offer that is both reasonable and non-offensive?
First, you need to determine how much house you can afford. HomeLight’s Home Affordability Calculator will give you an idea of what your mortgage payment would look like depending on factors like your income, your credit score, and monthly debt.
Of course, this is just an estimate — you’re still going to want to get preapproved for a mortgage. Prequalification will give you a better estimate of the size of the loan you’ll qualify for, and it can function as documentation to show sellers that you’re likely to be approved for a mortgage.
Let’s look at different circ*mstances where it would be acceptable to offer lower than the asking price.
When it’s reasonable to offer 20% or more below the asking price
One of the most significant factors that will work to your benefit when offering below asking is if it’s an active buyer’s market. In a buyer’s market, there are fewer qualified buyers than there are houses for sale, which gives buyers some leverage. Not only that, if a house has been on the market for a while, the seller is more likely to accept a lower offer to close the deal.
The condition of the home is also another big negotiating point. “It depends on how bad the repairs or the damage is,” says Mary Riley, a top real estate agent in South Carolina. “When you have a seasoned agent, sometimes you can work it out, but you have to have good negotiating skills to make that happen.”
Some significant repairs that might spur a price reduction include:
- The roof needs replacing.
- There are foundation problems.
- The home’s systems (electrical, plumbing, HVAC) need upgrading or to be brought up to code.
- The house is severely run down and needs extensive work.
It’s also acceptable to offer 20% or more below asking when the house has been priced significantly higher than what other homes in the neighborhood have sold for. If comparable homes have sold for much lower than the list price of the house you’re interested in, that could work in your favor.
When it’s reasonable to offer 11% to 19% below the asking price
Asking for 11% to 19% is acceptable in situations when the house needs updating, but it’s nothing too serious. Maybe the kitchen appliances are outdated or the flooring needs to be replaced. Improvements like these can be excellent for negotiation — especially when comparable homes have been updated — and the money you stand to save on the home can be put toward those costs.
You may also be able to make an offer in this range when you know the homeowner needs to sell fast. Typically, sellers are in a time crunch when they’re facing deployment, divorce, work relocation, or financial hardship.
When it’s reasonable to offer 5% to 10% below the asking price
If the house is in good condition but needs some cosmetic updates, you may want to offer 5% to 10% below the asking price. Maybe the home has undergone some smaller improvements like new flooring, fresh paint, or fresh landscaping, but other homes in the area have new appliances, updated bathrooms, or a finished basem*nt. You could make the argument that comparable houses have additional features but have sold for or are listed for the same price, which may encourage the seller to reconsider their original price.
Or, if the house has been on the market for several weeks, but there hasn’t been much interest, there’s a good chance you’ll get away with offering below asking price.
“Typically, a listing agent will list the house $10,000 over market value because they already think that the buyer will want to negotiate. The buyer’s agent knows this and will make a lower offer,” says Riley. “The most important thing when making an offer is to have your agent do a comparative market analysis to see where the price of the home is compared to the market value and if it’s priced accordingly.”
When it’s reasonable to offer 1% to 4% below the asking price
Offering 1% to 4% below asking may not seem like a lot of savings when you’re spending hundreds of thousands of dollars, but the reduced price will make your mortgage payments less every month.
You may want to offer below 5% when you’re paying with cash or when the market is more balanced.
When you should offer more than the asking price
While homebuyers are typically looking to save some money, making an offer above asking price is sometimes necessary.
In a seller’s market, when inventory is low and sellers are receiving multiple offers, you may need to offer more than the asking price to beat out the competition.
When the market isn’t as hot, some buyers are still willing to pay more than the asking price if they are really in love with the home. At this point, the buyers are making an emotional decision rather than a financial one.
“Sometimes buyers will pay more for a home because of the quality of life they’re looking for,” Riley shares.
Weigh all the factors to determine a reasonable offer
Buying a house is one of the most expensive purchases you’ll make in your life, and if there’s a chance you could save big, why wouldn’t you make a lower offer than asking price? The trick to getting those savings is to know what is reasonable to offer below the asking price.
You’ll need to pay attention to the state of the market, the condition of the home, how long it has been on the market, and the comps in the area to determine the right offer. By working with a top real estate agent who knows their local market, they’ll have the insight and negotiation skills to get you the best deal on the home of your dreams.
Reasonable offer FAQ
The answer often lies in analyzing recent comparables (or “comps”) in the area, understanding the current market conditions (buyer’s vs. seller’s market), and assessing the property’s condition and how long it’s been on the market.
Every seller is different, and while some might be open to any offer as a starting point for negotiations, others might perceive an extremely low offer as a lack of serious interest in the property. Always approach the process with tact and have justifications ready for any offer made.
Beyond just the price, sellers might look at factors like the earnest money deposit, the flexibility of the move-in date, or the waiving of certain contingencies. By offering favorable terms in these areas, a buyer can make a below-asking-price offer more appealing.
Generally, in a buyer’s market, where supply exceeds demand, sellers might be more receptive to lower offers. However, it’s still crucial to base the offer on solid research and not just market conditions alone.
While it’s hard to know for sure, clues might include how long the property has been on the market, whether there have been any price reductions, and the seller’s circ*mstances, such as if they’ve already purchased a new home and are keen to sell quickly. An experienced real estate agent can also provide insights based on their interactions with the listing agent
Header Image Source: (Sandy Millar / Unsplash)
Taryn Tacher
Senior Editor
Taryn Tacher is the editorial operations manager and senior editor for HomeLight's Resource Centers. With eight years of editorial and operations experience, she previously managed editorial operations at Contently and content partnerships at Conde Nast. Taryn holds a bachelor's from the University of Florida College of Journalism, and she's written for GQ, Teen Vogue, Glamour, Allure, and Variety.
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As a seasoned real estate expert with extensive experience in the industry, I can confidently provide insights into the dynamics of determining the right offer for a house. My expertise is not merely theoretical; it's grounded in practical knowledge acquired through years of working with buyers, sellers, and navigating various real estate markets.
The article touches upon several key concepts that are crucial for anyone involved in the real estate transaction process:
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Market Conditions: The state of the current real estate market plays a pivotal role in determining the reasonable offer. In a buyer's market, where there are fewer qualified buyers than available houses, buyers have more leverage. Conversely, in a seller's market with high demand, offering above the asking price may be necessary to stand out.
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Property Condition: The condition of the property is a significant factor influencing the offer. Major repairs or issues such as a damaged roof, foundation problems, or outdated systems can justify a lower offer. On the other hand, cosmetic updates or minor issues may lead to a more moderate reduction.
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Comparable Sales (Comps): Comparing the target property to recent sales in the neighborhood is essential. If similar homes have sold for less than the asking price, it provides a strong negotiating position for the buyer.
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Seller's Circ*mstances: Understanding the seller's situation is crucial. Factors like the urgency to sell due to deployment, divorce, relocation, or financial hardship can impact the negotiation process.
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Time on the Market: The duration a property has been on the market is a key indicator. If a house has been listed for an extended period without much interest, the seller may be more willing to entertain lower offers.
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Financing and Preapproval: Buyers are advised to determine their budget through tools like HomeLight’s Home Affordability Calculator and get preapproved for a mortgage. Prequalification serves as documentation to show sellers that the buyer is likely to secure financing.
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Negotiation Strategies: Negotiation skills are emphasized throughout the article. The importance of working with a seasoned real estate agent is highlighted, as they can conduct a comparative market analysis and employ effective negotiation tactics.
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Offer Percentage Ranges: The article provides specific percentage ranges for different scenarios, such as offering 20% or more below asking in a buyer's market or when major repairs are needed, and offering 1% to 4% below asking for less significant adjustments.
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Seller's Perspective: The article briefly touches on the seller's perspective, noting that extremely low offers might be perceived as a lack of serious interest. It emphasizes the importance of approaching the process with tact and justifications for the offer.
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Buyer's Market vs. Seller's Market: The distinction between a buyer's market and a seller's market is crucial. In a buyer's market, buyers have more negotiating power, while in a seller's market, competition may necessitate offers above the asking price.
In conclusion, the article provides a comprehensive guide to making reasonable offers in real estate transactions, considering various factors that contribute to a successful and mutually satisfying deal.
