How Much to Offer on a House Without Getting Ripped Off

Tips and tricks for making an offer on that home of your dreams.

How Much to Offer on a House Without Getting Ripped Off

Wondering “How much should I offer on a house?”

Consider this. You found your dream home but are unsure how much you should offer. Should you lowball it and risk rejection, or quote a substantial figure that will leave less money in your wallet? How do you make the best deal of your life and avoid buyer's regret later?

The best price isn’t set in stone. Before you contact the seller, you should look over a few factors to ensure you get the ideal deal.

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How Much You Should Offer on a House

When you submit an offer for a house, never quote the exact amount you are willing to pay. Keep the figure below your budget or 5 to 10% below the seller's price. That's what sellers do – they know buyers will do this and place their house on the market for far more than its actual value.

Types of Offers

But that doesn't mean you should go for an extremely lowball or high offer. If you go too low, the seller will not take you seriously, and if you offer a higher bid, you will end up paying more than you have to.

Here are some options you should consider to determine the best offer:

The Guide Price
This is the least amount the seller may accept, but it will be unacceptable during a seller's market (more on that later). Other buyers may quite a higher price than you do, triggering a bidding war resulting in a price higher than the stated price.

The Cheeky Offer
A 'cheeky offer' is an offer that falls between 10% and 25% under the seller's price. Again, your offer should be reasonable, or the seller may disregard you.

Sealed Bids
Sealed bids level the playing field for buyers – potential buyers provide offers in a sealed envelope, and the one who gives the highest offer wins at the auction. However, these can be risky since no one knows how high they should go, so they bid too high. So pick a property that you aren't tempted to exceed your budget for if you are on a strict one.

Holding Deposits
Also known as holding charges, this deposit is given to the seller via an estate agent. The deal basically books the property for the buyer in exchange for the contract. The buyer can get the deposit back once the deal is signed.

Tips on How Much to Offer on a House

Here are some tips that can help you make an informed decision regarding your purchase:


Don’t Offer More Than You Can Afford

Rule of thumb – You cannot offer more than you can afford on a house, so figure out a budget first. At most, it shouldn't be more than three times your yearly household income. So, for instance, if you earn over $250,000 per year with your partner, search for homes listed at $550,000 or $650,000. Additionally, the mortgage payments shouldn’t be more than 30% of your monthly income (pre-tax).

Evaluate Market Conditions

The real estate market can be fickle. Understanding the spikes and lows can help you determine the figure you should propose to a seller. In other words, your decision should hinge on whether you are in either of these markets:

Buyer’s Market

In a buyer's market, real estate inventory is high – there are more properties for sale than interested buyers. Naturally, prices drop, and buyers can quote a price that suits their budgets and also seller concessions.

Seller’s Market

The opposite is the case in a seller's market – there are too many buyers and not enough real estate to go around, leading to bidding wars and high prices. Homes also sell faster in a seller's market.

Compare the Price With the Market Price

Before proposing a price (whether you are in a seller or buyer's market), compare the listing price with other properties in the area, aka comparable homes. These are usually the same size as the listed house and also share similar conditions and features.

Check how much they sold for and how long it took for the sellers to find buyers. The listing details may also have information on the offers they got. Ask your real estate agent to analyze the competitive market to get this information. By determining average prices in the area, you can determine a reasonable pricing proposal for the house.

Get Preapproved for a Mortgage

Three things happen when you get preapproved for a mortgage:

1. It signals to the seller that you are a serious buyer since it means you are likely to avoid financial issues.
2. It gives you an idea of how much you can get for a loan from a mortgage lender for the down payment.
3. Once you get preapproved, you will only end up offering what you can reasonably finance.

When You Should Go for a Low Offer on a House

If you have a low budget or have other plans for it besides a house purchase, providing a low offer isn’t a bad idea. These are the best times when you should consider offering less than the listing price:

  • You are in a buyer’s market. In this case, sellers will have trouble finding buyers who can match the listing price and may be willing to accept a lower offer.
  • The house has been on the market for several months and requires extensive repairs. Determine the maintenance and repair costs and use that information to reduce the price. Also, find out how often the price was reduced since it was on the market. However, remember that this may not work if the seller has several offers.
  • The seller wants to sell as quickly as possible. This can happen if they want to relocate quickly for a job or any other emergency.
  • The seller agent wants to sell the house quickly and without too much effort so they can get their commission fast.
  • The seller has multiple agents. In this case, the seller may be persuaded to get a lower price so the agents can get their commission fast.

When You Should Go for the Listing Price

You may end up getting a better deal in some cases. Here are some instances when offering the listing price makes sense:

  • You have a competitive offer – other buyers offer less than you are for the house.
  • The price closely matches the home's market value. If you wish to avoid complex and long-winded negotiations and believe the asking price is reasonable, going for the listing price is a good idea.
  • You want to accommodate seller concessions – the seller is willing to cover repairs or closing costs if you offer a higher price.
  • You offer a completion date that works for the seller or is the only one interested in the property. If the seller wishes to move out as soon as possible or understands he won't get a better offer, he will be more willing to sell fast.
  • You prove you can act quickly and are more decisive than other buyers. Sellers will always be more interested in buyers with the funds to purchase property quickly. They know the longer they wait for a buyer, the higher the chances they abandon a sale. If a house is on the market for months, it can depreciate in value. So if you can make a large deposit and, as a surveyor, ready to go, your offer will be prioritized.
  • You have already sold your home. In this case, the seller knows you need a house urgently and will be more willing to pay the listing price. They won't have to wait for you to sell your house before buying theirs.
  • While negotiating for a house, remember the seller is probably stressed out about getting a fair market price for it. In some cases, they may be willing to go for a price lower than the market price. Research the market to determine if circumstances are in your favor or not.

When You Should Go for More Than the Listing Price

If you have your heart set on a property and can afford it, go for more than the listing price. Here are some more instances when this strategy makes sense:

  • You are in a seller's market. By offering more than the listing price, you can avoid a stressful bidding war, and the seller will prioritize your offer.
  • The home is selling for significantly less than the market price. If the seller has listed the home for 5% to 10% less than the market price, they may want to trigger a bidding war. But you can increase your offer without going over budget.
  • Cash buyers are interested in the property. Sellers LOVE cash offers since these ensure quick closings. Offering more than the listing price, even if it isn’t cash, can make your offer more tempting.

Bottom Line

So the answer to 'how much should I offer on a house' is that it depends on your circumstances and budget. You should go for the listing price if you need to make a quick purchase, higher than the price in a competitive market, or go lower than the listing price if you are in a buyer's market. Ask professional real estate agents for their input to get a clear picture of the market and make an informed decision.

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