Anyone house hunting right now knows that we’re in the midst of a seller’s market across much of the country. Homebuyers may find they have to offer much higher than the listing price to compete with other buyers. But the tides may change as the housing market corrects itself, and the buyers will have more leverage one.
How much to offer on a house depends on the market (you need a buyer’s market), what shape the home is in, and the seller’s needs. But if you have the right conditions, you can sometimes successfully make an offer on a house for less than what the seller is asking. Let’s take a closer look at what you need to know before you make an offer below the asking price and how to do it successfully.
What the real estate market in your area looks like will determine whether you can make a successful offer below asking price. If you’re currently in a buyer's market, with tons of available inventory and homes that sit on the market for a while, you will have more negotiation power with the sellers. Your real estate agent will help you determine how competitive your local market is and if you should make an offer below the asking price.
If you're in a seller's market, then you may end up doing the opposite: making an offer above asking price.
There aren’t any set rules regarding how low of an offer is appropriate. Again, your real estate agent should be able to help you formulate a suitable offer. How low you can go will depend on if other offers are on the table, how eager the seller is to sell quickly, and how long their home has been on the market. If you have your heart set on a particular home, it’s important to remember that sellers will typically take the highest offer they get, so have your agent inquire as to whether or not the seller has other offers on the table.
While there are pricing rules for offers below the asking price, the following guidelines will give you an idea of how much lower you can go when you sit down to create your offer.
To make a significantly lower offer of 20% or more, you have to be in a buyer’s market where there are many more houses for sale than buyers. If a home won’t sell after six or more months on the market, that’s a sign it’s a good time to strike with an offer this low. What condition the home is in also enables you to make a much lower offer, especially if pricey home repairs are necessary.
You should also take a look at what other homes in the neighborhood recently sold for. If nearby homes recently sold for much less than the original list price, that may work in your favor.
It’s also helpful to find out why a seller wants to move. If they need to relocate for a new job, they may be eager to get the show on the road and accept a lower offer.
It will be easier to get away with offering 5% to 10% below the asking price, especially if your real estate agent has strong negotiation skills.
Your agent should study nearby homes to see what selling points they have, as this will help you decide how much to offer on a house below asking price. If other homes in the same price range have new appliances or recently remodeled kitchens, and the home you want to put an offer on doesn’t have these things, you may be able to reference those homes during your negotiation. Do ample research so you can argue what the home’s true market value is. Many agents will recommend slightly higher listing prices with the assumption buyers will want to negotiate down, so don’t be afraid to try to snag a deal — especially if the home didn’t sell quickly.
While asking for as low as 1% less than the listing price may not seem worthwhile, if you buy a $1,000,000 home, you could save $10,000. That’s a lot of savings that will bring your monthly mortgage payment down, or you can put those savings towards new furniture or to fund repairs around the house. A small discount like this is a good thing to ask for if you’re paying cash (which is very appealing to sellers) or if you’re in a market that currently hovers between a buyer’s market and a seller’s market.
Your real estate agent must be upfront and honest with you about your chances of making a successful offer below the seller’s asking price. They should do research about comps (aka comparable homes) in your area so that you all better understand if you should make a lower offer or if it’s safer to stick to the seller’s ideal price.
Of course, some risks come along with offers that are below the asking price:
When you buy a home with Orchard, you'll work with an experienced local agent to help craft your offer.
If you want to make a low offer on a home, go about the process the right way. Here are some helpful tips that will make it easier to find the right number to propose and will teach you how to sweeten the deal for the seller so they are more likely to accept a lower price.
There’s never a guarantee when you make an offer on a home, even if you offer well above their listing price. Work closely with your agent to determine when it’s worthwhile to make a lower offer. If you play your cards right, you may save a pretty penny.
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