Have you ever wondered how much you should offer on a house? Well, the not-so-simple answer is that it will depend on the market you’re in, the list price, the kind of mortgage you can afford, and many other factors that you should put into consideration before beginning negotiations.
Of course, everyone likes to score a deal. It can feel pretty good to negotiate a seller’s price down, and also a small price cut can go a long way on those mortgage payments.
But, if you go in with a lowball offer, you risk offending the sellers and getting your offer dismissed. That’s why you need to strike a balance. But how do you do that?
Here are four questions to ask yourself to determine that happy medium, and to help you make the perfect offer price.
Are you in a buyer’s or seller’s market?
A buyer’s markets come with a lot of flexibility on price since the available inventory is high and houses tend to stay on the market for a longer period. Here, sellers are more willing to negotiate because the offers are few and far between.
Whereas in a seller’s market, the inventory is usually low with multiple buyers so it’s much harder to go below asking price. So, if you’re interested in the house, it’s best to offer the list price or even consider going above the listing price if you can.
All in all, before submitting any offers it’s best to consult your real estate agent to determine which market you’re currently in.
How long has the listing been active?
If the house has been on the market for a long period, the owner may be determined to sell it as soon as possible, which can mean flexibility on price. This means that, if you come up with an offer that’s too low, the worst he can do is come back with a counteroffer that’s still reasonable. However, experts advise that to avoid making a lowball offer that might insult the seller, never go more than 25% below the listed price.
How does the price compare to similar homes in the area?
Knowing how similar houses have sold in the neighborhood in the last few months will give you an edge towards making the best offer. Ask your agent to work up comparative market analysis and use it as your guide to home buying.
How badly do you want the home?
And, finally, ask yourself: How would you feel if your offer is rejected? If you feel that this is your dream home and don’t want to keep on searching, then it may be worth it to offer exactly what they’re asking for- or a bit more- to show the seller that you’re move-in ready.
However, if you think you can be able to find another home without any issues, then there’s no harm in trying to score a deal.