Purchasing a house is going to cost a pretty penny, but if you know what is reasonable to offer below asking price, you might be able to save some coin. Buyers often want to know how much below asking price they can offer that the seller would accept — or at the very least be open to negotiation. With that said, it’s important to remember that you can’t submit an unreasonably low offer because you don’t want to offend the seller and possibly lose out on the home of your dreams.
What is reasonable to offer below 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 as well.
So, how do you even come up with an offer that is both reasonable and non-offensive?
First off, you have to have a realistic budget, which is the best way to know how much home you can afford. You can figure this out by using our Home Affordability Calculator. This tool 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. This prequalification will give you a better estimate of the size of the loan you’ll qualify for, and it can work as documentation to show the sellers that you’re likely to be approved for the mortgage.
With that in consideration, let’s say you’re interested in buying a $300,000 house. Let’s look at different circumstances where it would be acceptable to offer lower than asking price.
When it’s reasonable to offer 20% or more below the asking price
For a home that is priced at $300,000, asking for 20% off asking price could save you a whopping $60,000!
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. When the market is in the buyer’s favor, this means that there are fewer qualified buyers than there are houses for sale, which gives the buyers some negotiation power. Not only that, if the house has been on the market for more than six months, the seller is more likely to accept a lower offer.
The condition of the home is also another big negotiation point. Mary Riley, a top real estate agent in South Carolina, states, “It depends on how bad the repairs or the damage is. 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
Another situation where it would be acceptable to offer 20% or more below asking is when the house has been priced significantly higher than what other homes in the neighborhood have sold for. If comparable homes have sold much lower than what 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
If you’re asking for 11% to 19% off a home with a listing price of $300,000, you could save between $33,000 and $57,000. This kind of offer is acceptable in situations when some updates need to be made — but nothing too serious.
Maybe the kitchen looks like it was from the ’70s, and you want something a little more modern, or perhaps the flooring needs to be replaced. Updates like these can be excellent for negotiation, especially when comparable homes have been updated.
Another instance where you might be able to make an offer in this range is when you know a seller is desperate to sell. Some reasons for their desperation could be due to deployment, a divorce, relocation due to work, or financial hardship.
When it’s reasonable to offer 5% to 10% below the asking price
Buyers who offer 5% to 10% below asking stand to save $15,000 to $30,000 on a $300,000 house — still a nice chunk of change, if you ask us!
To get these kinds of savings, you could also use comparable sales as negotiation tools. For example, maybe the home has had some minor updates like new flooring, fresh paint, or the landscaping has been improved. These updates are a good starting point.
However, if other homes in the area have new appliances, updating bathrooms, or a finished basement, you could make the argument that comparable houses have additional features but have sold for or are listed for the same price as the seller’s featureless home. These arguments may encourage the seller to reconsider the price.
Another instance where buyers could offer 5% to 10% lower than asking is when the house has been on the market for several weeks, but there hasn’t been much interest. This happens a lot in a buyer’s market simply because buyers have so many options — some of which might be priced a bit lower than others.
Riley shares an insider tip: “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 already knows this and will make a lower offer. 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% or more below asking
Offers in this range can save you anywhere $3,000 to $12,000 on a $300,000 home. These savings may not seem like a lot when you’re spending hundreds of thousands of dollars, but your mortgage payment might be a couple of hundred dollars less every month.
A good reason why you may want to offer below 5% is when you’re paying with cash (although companies who offer sellers cash for their home will typically offer 65% below market price).
Another instance where a buyer may offer 1% to 4% below asking is when there are multiple offers on the table, and sellers typically accept the highest offer.
When you should offer more than the asking price
While the majority of homebuyers are looking to save some money, making an offer above asking price isn’t unheard of. Some people are willing to pay more than 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.
“That isn’t necessarily a bad thing either because it has driven up our real estate market.“
“Let’s say you buy a property that’s over market value. If you’re going to sell it in two to five years, you’ll be able to sell it and make money on it because the market value will increase.” Riley adds, “Strategies for making an offer in today’s real estate market is going to depend on where you live.”
Know what is reasonable to offer below asking price and save big
Buying a house is going to be the most expensive purchase you’ll make in your life, and if there’s a chance you could save up to tens of thousands of dollars, why wouldn’t you make a lower offer than asking price? The trick of getting those savings is to know what is reasonable to offer below asking price.
There will be instances where you could offer significantly less than asking price. However, you need a good reason to do so, like if the house needs some serious work or it’s priced much higher than other homes in the area.
A good rule of thumb is to know if it’s a buyer’s or a seller’s market and work with a top-rated real estate agent with an excellent track record. By working with a savvy agent who knows their local market, they’re likely to have the insight and negotiation skills to get you the best deal on the home of your dreams.
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